Preamble

The House met at half-past Nine o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PETITION

Najat Chafee

Mr. Laurie Pavitt: With your permission, Mr. Speaker, and that of the House, I beg leave to present a petition on behalf of one of my constituents, Najat Chafee. I know that it will be heard with your understanding and compassion and that of all hon. Members present. I hope that the right hon. Gentleman the Home Secretary will take a similar attitude. It is a token petition. Ten thousand signatures are being collected, but, because of the rising of the House, it has been necessary to present the petition this morning. The petition reads:
To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled.
The humble Petition of residents of the London Borough of Brent, friends of Najat Chafee, and others
Sheweth,
That Najat Chafee came to Britain in 1979 following her marriage to Hassain Ghaulan, and gave birth to a child in July 1980,
That following her husband's consistently violent behaviour towards her she finally left him to live in a Women's Aid refuge, That her husband has now been deported,
That she would in all likelihood suffer destitution and further violence if she too were deported to Morocco,
Wherefore your Petitioners pray that Najat Chafee is not deported to Morocco but is given the right of permanent residence in Britain.
And your Petitioners, as in duty bound, will ever pray, etc.

To lie upon the Table.

Orders of the Day — Unemployment (Western Isles)

Mr. Donald Stewart: I am pleased and fortunate to have the opportunity of presenting this submission on behalf of my constituents about the extremely serious level of unemployment in my constituency. It has been the sad record of my constituency over a long period—ever since, in fact, records have been kept—that, more often than not, we have been at the top of the United Kingdom unemployment league table. Last year, unemployment in the Western Isles rose fairly steadily from around 20 per cent. in mid-1981 to a high of around 23 per cent. in December of that year. This year started off with an even higher level of 24 per cent. in January. The figure dropped temporarily to 21 per cent. in April, but the May figure showed a rise again to 22Ċ3 per cent. All these figures are non-seasonally adjusted.
In comparison, the figure for the whole of Scotland fell from 15Ċ3 per cent. in January 1982 to 14Ċ5 per cent. in May. In Great Britain as a whole, the trend was much the same, with a fall from 12Ċ5 per cent. in January to 12Ċ3 per cent. in May. Obviously, the Western Isles is faring badly compared with Scotland and Great Britain as a whole. I am surprised and angry that the Secretary of State for Industry, in the light of these figures, has refused to accord special development area status to the Western Isles.
The unemployment figure for the Western Isles in July is 24Ċ6 per cent. Male unemployment is 30Ċ6 per cent. These figures are due largely to the closing down of the fabrication yard at Amish Point, Stornoway, and the start of a recession in the Harris tweed industry. That recession will have a further disastrous effect on next month's figures, which I forecast will be in the region of 30 per cent. There are a number of specific areas in which the Scottish Office could assist. I submit these to the Minister. I am grateful to the hon. Gentleman for being present to hear these points.
An integrated development programme is getting under way in the Western Isles. I hope that the Minister will ensure that submissions from the programme requiring the assent of the Scottish Office will be expedited and any delay eliminated so far as this is humanly possible. I would ask the hon. Gentleman to represent to his right hon. Friend the Secretary of State that he ensures, in EEC discussions on a common fisheries policy, that a 12-mile limit is reserved for the Western Isles and that the fisheries plan of the Western Isles islands council shall have the same consideration as that accorded to the Shetlands plan, which I support.
If the fisheries in the area were to be given over to the EEC or other countries, to the detriment of the island fleets, this could have a catastrophic effect on employment and on the island community. I have already mentioned the depressing and economically devastating effect of the closure of Lewis Offshore Limited's fabrication yard. We must all hope that this is part of a temporary slack period for these yards and that contracts will again become


available in the coming months. Matters are not helped by BNOC's award of a contract to a Swedish yard. Will the Minister intervene with the Department of Energy to ensure that such contracts are confined to yards in this country as far as possible?
It is remarkable that the Government are showing sympathy for problems south of the border by enabling the replacement order for the "Atlantic Conveyor" to go to an English yard and by relaxing hire-purchase controls for the benefit of the car industry in the English Midlands, while in Scotland the gas pipline is aborted, Corpach has collapsed and the Invergordon smelter has been allowed to die in the cheapest energy area in the United Kingdom.
Long-term development in the islands cannot be divorced from the necessity for a reasonably economic trade system. Like me, the Under-Secretary of State represents a rural and island constituency, and I do not need to waste time in lecturing him. The Government have made a good start, but I urge the Under-Secretary to proceed to road equivalent tariff at the earliest feasible date.
Again, I draw the Government's attention to the need for a weighting allowance for Scots, especially for those resident in the islands and remote areas. Figures published in June by the Regional Rewards Surveys continue to show what has been true for many years, that, apart from London and the rich South-East, Scotland is the only area where the cost of living is well above the United Kingdom average. The cost of goods and services in the Western Isles is 16 per cent. above the national average. It is grossly unfair that on certain goods and services on which VAT is payable the already inflated prices require a higher level of VAT to be levied, thus adding tremendous extra cost. I do not expect the Under-Secretary to accept my argument today—although I shall be delighted if he does—but I wish to put down this marker.
There is another matter in which the Scottish Office can act expeditiously to improve employment in the Western Isles. I have already written to the Secretary of State in support of a plea by Mr. Alexander Matheson, convenor of the Western Isles islands council, about the Manpower Services Commission's community enterprise programme. The council is worried about the delay experienced in obtaining approval for applications submitted to the area board in Inverness in recent months. At present, 40 applications have been made, which would provide 179 places, and other projects are in the pipeline. The projects provide useful amenities and infrastructure, in addition to easing unemployment. I hope that the Secretary of State will take the necessary action to have the outstanding applications approved without further delay.

The Under-Secretary of State for Scotland (Mr. John MacKay): The subject raised by the right hon. Member for Western Isles (Mr. Stewart) is very important, and I am glad to have the opportunity to express the Government's anxiety about unemployment in the Western Isles. There is a certain appropriateness, which I am sure is not lost on the right hon. Gentleman, that I should be answering this debate, because I am one of a long line of Conservative candidates who fought in an election in the Western Isles. I remember with much

pleasure the three weeks that I spent there and the splendid people whom I met, even though it was in February 1974 and the weather was not at its best. I must say that I do not remember the election result with as much pleasure as the right hon. Gentleman. However, fighting the Western Isles is a good stepping-stone for Conservative candidates, and I am probably the third since the war to have campaigned in the Western Isles and subsequently ended up at this Dispatch Box. One even reached the Chair.
At present, unemployment in the Western Isles is over 24 per cent. of all employees. As is true of all Scottish unemployment figures, this month the figure reflects the influx of school leavers on to the register. The percentage probably is exaggerated because of the number of self-employed workers in the islands who do not figure as employees. However, I would not attempt to deny that unemployment was a major problem in the islands.
To some extent, like the rest of Scotland, the islands are victims of the current recession which has brought about an increase in unemployment everywhere in the United Kingdom and the Western world. But a remote rural community such as the Western Isles has unique problems which are perennial. As the right hon. Gentleman said, the unemployment figures in the Western Isles have been higher than elsewhere for many years. The reasons for this are various: the sheer distance from major economic centres; difficult agricultural conditions and a heavy dependence on traditional methods of agriculture; vulnerability to the unpredictable nature of the fishing industry; and the lack of major indigenous industries. They mean that the islanders are keen to welcome an incoming employer and are especially vulnerable if such an employer falls on hard times, as has happened recently to Lewis Offshore Limited, a subject to which I shall return.
The Government believe, therefore, that an important part of the future of the islands lies in fostering and improving their traditional industries of agriculture, fishing, crafts and tourism, which play a very important part not only in the economy of the Western Isles but in that of the whole Highlands. The local activities of the Highlands and Islands Development Board are aimed at this end, and the recently announced integrated development programme for the Western Isles is designed very much with the object of helping and bolstering those indigenous industries.
The right hon. Gentleman has argued this morning, as he has before, that the assisted area status for the Western Isles ought to be increased. I must tell him that the Government do not consider just unemployment rates when looking at the grade of assisted area status. Although the unemployment rate in the Western Isles is high, that is not the only factor to be taken into account. In any case, I am sure that the right hon. Gentleman recognises that the real advantage that we in the Highlands have is that as part of the HIDB area we get the best possible package of industrial help from the board.
The most important thing happening in the Western Isles is the integrated development programme. The regulation set out by the European Council is
to improve working and living conditions in the Western Isles.
Both the Government and the European Community are injecting substantial additional public money into the islands for that purpose to the tune of £20 million.
With a few exceptions, farming in the Western Isles is a part-time activity, and it is unlikely that the additional


incentives to be provided in agriculture will create very many new full-time jobs in that industry. But it ought to generate an increased level of activity, and it should produce an increase in output which will benefit the entire economy of the islands.
It is expected that the bulk of the £20 million to be provided by the Government will be spent on fisheries and fisheries-related projects. In the programme which the European Commission has approved, it is estimated that grants for landing facilities may total £3 million, grants for fish processing £5 million, and grants for fish farming £1¼ million. If we get the response for which we are looking—the success of the programme depends entirely on the people of the islands taking up the offer that we make—a substantial number of additional jobs will be created.
Applications will be dealt with as expeditiously as possible. We want the project to be a success, perhaps as a forerunner to putting other cases to the European Community, and a success also for the Western Isles. On the road to that, the project team which will look after the IDP has been appointed already. The statutory instrument laid before the House on 21 July comes into effect on 1 September, as does the fisheries scheme. Anyone who has applied under existing less favourable schemes but who has not yet started work will have the opportunity to defer starting and to seek grants under the new scheme.
As the right hon. Gentleman knows, the discussions on the common fisheries policy have been taking place for some time. I am sure that he appreciates that the north of Scotland box, which goes as far as the Western Isles, will be to the advantage of fishermen in the Western Isles. The Minch and the important waters between the Western Isles and Scotland will all be well within British limits.
I said that I would return to the matter of Lewis Offshore Limited. I am very conscious of the impact on the community in Stornoway of the decision by Lewis Offshore Limited to lay off the bulk of its work force and to place the yard on a care and maintenance basis until new orders are secured. Orders for development of Morecambe Bay, of the Rough field and the Beatrice B field are currently coming forward, but at a time when work in the oil construction industry is scarce—not an uncommon phenomenon in a notoriously cyclical industry—competition is exceedingly fierce.
The Government, through the Offshore Supplies Office, will continue to do all they can to ensure that Lewis Offshore Limited is given the opportunity to compete for orders from the United Kingdom continental shelf, but I must make the general point that it is up to United Kingdom companies, including Lewis Offshore Limited, to come forward with competitive bids for projects. That point is particularly relevant in the context of the BNOC order, which the right hon. Gentleman mentioned, where the successful Swedish bid was considerably lower than that of the British yards. It is easy to say that BNOC should have been directed to place the order in the United Kingdom, and strenuous efforts were made to persuade the corporation in that direction, but ultimately the matter is for the commercial judgment of the oil company concerned. The long-term survival of the United Kingdom oil supply industry—including Lewis Offshore Limited—is entirely dependent on its ability to compete effectively in world markets.
The right hon. Gentleman and I, with our concern for many islands, are well aware of the impact of shipping

costs on the general economy. I thank him for recognising that the Government have given a considerable amount of money in the last three years to support for shipping services in the islands. Support for those services has increased from £5.1 million in 1979–80 to £10.6 million in the present financial year. Indeed, on the west coast it has been possible for Caledonian MacBrayne this year, with the support provided by us, to hold fares and tariffs at the same level as in 1981.
In addition to increased support to the ferry services, we have extended support to bulk shippers, which is a very important aspect especially of the commercial traffic to the islands. My view, shared by the Government and by everyone in the islands, has always been that the cost of the commercial traffic is the key to the economy of the islands.
The right hon. Gentleman argued that a cost of living supplement should be paid to workers in the Western Isles. He said that he would be surprised if I conceded. I am sorry to tell him that I shall not surprise him this morning. Local authority employees have such a weighting. Their rates have been negotiated through the National Joint Council for Local Authority Services and are already in their wage rates. They have a distant island allowance of £9.06 a week. It applies to manual workers and a wide range of administrative and professional staff, including the teaching profession. However, it is not for the Government to dictate the rates of pay which should apply to other enterprises in the right hon. Gentleman's area or in that of any other hon. Member.

Mr. Donald Stewart: I remind the Minister that there is a London weighting allowance which everyone accepts as being justified by the high cost of living in London. My argument is that the same principle should eventually apply in other areas of the United Kingdom, such as the Highlands and Islands and other rural areas where there are special difficulties.

Mr. MacKay: Obviously, in local authority negotiations the local authorities have been persuaded by the union side that there should be some sort of weighting for the Western Isles. It is up to the employees' side, in negotiations with private employers, to persuade them that a similar weighting should be given to their employees in the Western Isles.
With regard to the community enterprise programme, I share the right hon. Gentleman's concern about the rising numbers of long-term unemployed in the Western Isles. I think he will recognise that the Western Isles has received very favourable treatment under the community enterprise programme. Compared with other areas with serious problems of long-term unemployment, it has received a relatively high share of the available places. For that I suppose the Western Isles council and the people involved can take a bow.
At the end of June, the 200 community enterprise places filled in the Western Isles represented 3.1 per cent. of the Scottish total of CEP places, whereas the long-term unemployed in the Western Isles are only 0.4 per cent. of the Scottish total. The figures show that the Western Isles have been very quick off the mark and gained considerably in the initial stages of the CEP. In recent months demand for the programme nationally has been sufficiently high to fill all the available places, and further discrimination in


favour of the Western Isles could only have been at the expense of other areas which have equally severe problems and have put in bids for CEP places.
Earlier this week, my right hon. and learned Friend the Chancellor of the Exchequer announced details of the new community programme scheme which will provide temporary employment for 130,000 long-term unemployed people throughout Great Britain, which is about 100,000 more than under the present community enterprise programme. The new programme will enable more people to participate, both full-time and part-time, in projects of community benefit similar to those at present being undertaken under the community enterprise programme. I am sure that in allocating the resources available under the new programme the Manpower Services Commission will take full account of the new needs of the Western Isles, as of other parts of the country where long-term unemployment is a particular problem.
The recent news that the Harris tweed industry was having some difficulties is disappointing to us all, because it is one of the traditional industries in the islands and has a splendid export record—about 80 per cent. of its products are exported. The recent redundancy among mill workers is a serious matter for those employed full-time, and the outworkers—the part-timers who produce the tweed and give it its distinctiveness—have lost an important additional source of revenue.
The industry usually suffers some slackening off at this time of the year. I need not tell the right hon. Gentleman that, because he spent many years working in the industry and knows it much better than I do. I hope that it is a temporary phenomenon. I am sure that he will be able to recall other similar circumstances arising at previous times. We must hope that in the autumn, with the new patterns and designs, the market will pick up, because the industry is important to the Western Isles, not just for the employment in the mills but for the employment that it gives crofters in the islands.
Not all the news from the Western Isles is gloomy. For example, on Barra, Ardveenish pier has been completed, and there are good prospects for a fishmeal development on a factory site adjacent to the pier. In Harris, the Lingabay quarry project which will produce armour stone for marine-related construction projects is going forward, with the prospect of 15 new full-time jobs plus other ancillary jobs which will be created as a result.
Tourist development at Borve Lodge, Harris, has recently been announced by the HIDB and that will also create new employment. The conversion of the lodge to a hotel at a cost of £½ million should be completed in time for the 1983 season and will involve five full-time and 14 seasonal jobs. Individually, these may be small initiatives but, as recent events have brought home to us, small industries which are soundly based and have a long future are perhaps a better bet for the long-term economy of the Highlands than larger glamour industries which can cause problems in themselves and which, if anything happens to them, can cause great damage to the economies in the area.
I am sure that the right hon. Gentleman welcomes those initiatives, and especially the IDP, although he is always a little reluctant to say so because that would be conceding that the EEC might have something to be said for it. Considerable investment is going into the IDP. I know that he welcomes the help that we have given to the ferry services and our statement that we shall continue along that road, because we recognise that without help to the ferry services the islands' economies would be in great difficulty and danger.
We are doing our utmost to help with the difficult long-term problem in the Western Islands. I very much hope that people will come forward as quickly as possible and that the IDP gets off the ground, to the benefit of the farming industry in the Western Isles, to the benefit of the fishing industry, and, of course, spinning off from them, to the benefit of the whole community.

Orders of the Day — National Health Service (Scotland)

10 am

Mr. William Hamilton: I have extra time, and I greatly welcome it. The Under-Secretary of State for Scotland should be prepared to wait for a fairly lengthy speech, because the subject is of great importance to the future of not only the nursing profession but all the other professions and workers in the Health Service. Indeed, the principle of the Health Service is at stake.
On Thursday 15 July, in answer to a question from the hon. Member for Cheadle (Mr. Normanton), the Secretary of State for Social Services gave a written answer, printed in column 458 of the Official Report, about the effect on health services and staff numbers in the National Health Service following the Government's recent decisions on pay. It was a planted question, which enabled the Secretary of State to give a detailed reply without being subjected to a grilling in the House. It was clear from the answer that the Government were cutting the cash given to regional health authorities to enable them to carry out their responsibilities. It was also clear that the Government were determined to reduce staff levels in the Health Service.
The answer made a mockery of the Prime Minister's answers at Question Time yesterday, when she said that Health Service workers had great security of employment. She said that a few days after the Secretary of State had warned the regional health authorities that they must reduce staff. That was the clear implication of the written answer. The written answer from the Secretary of State makes the right hon. Lady's claim ring fairly hollow.
It was also clear from the Secretary of State's written answer that he could Snot get Cabinet support to allow the pay increase offered to nurses to be met by the Treasury in the next two years. The consequence of that will be that pay awards will have to be met out of the strictly limited funds that are available to the regional health authorities. Cuts in staff, cuts in services to patients and cuts in hospital building will be a direct consequence of that written answer. There will be a decline in the quality of services provided to patients as a result of that answer and the circular that was sent out to the regional health authorities.
The Secretary of State also gave detailed figures of the cash to be available to each of the 14 regional health authorities in England. There were revised and reduced allocations of cash for 1982–83, plus provisional assumptions for each of the next two years. The Minister also told the authorities that he had issued planning assumptions to the regions for the years 1983–84 and 1984–85, asking them to produce plans covering the next two financial years in the light of those provisional assumptions. He said that copies of the Department's circular on those matters had been placed in the Library. In other words, details of the proposed cuts affecting the regional health authorities were placed in the Library on 15 July.
On Friday 16 July a further statement was made in the House by the Secretary of State, which was not directly related to his previous day's answer, but was about the threat of industrial action then being made by the Health Service unions. As a consequence of that statement the Secretary of State had a roasting in the House for about half an hour.
In the exchanges on these matters with the Prime Minister in the House yesterday, reference was made to Mr. Albert Spanswick, the general secretary of the Confederation of Health Service Employees, in fairly scathing terms about his threatened increased industrial action, which, it was alleged by the Prime Minister and her colleagues, would jeopardise the well—being of patients in the Health Service. I am sponsored by COHSE. Mr. Spanswick is a personal friend of mine. I know all the officials of COHSE and large numbers of the members of that union. They need no lectures from the Prime Minister or from any Tory Minister or Tory Member of Parliament about the importance of safeguarding the health and welfare of the patients in their care. Many of them have given a lifetime of service, underpaid and overworked, to the National Health Service, and it ill-becomes the Prime Minister or anyone else to chastise them for their action.

Mr. Kevin McNamara: Is not my hon. Friend's case underlined by the vigil that is taking place beside the Pankhurst statue adjacent to the House of Lords, where four nurses from Hull are giving up their leave time to keep a vigil merely to point out the desperation of the position of all Health Service workers and their desire only that the matter go to arbitration, and no more than that?

Mr. Hamilton: My hon Friend and his colleagues introduced me to those ladies yesterday. They are gentle and unmilitant nurses who have been driven to this action by the meanness and callousness of the Government. The responsibility for any inconvenience that may be caused to patients in the Health Service lies exclusively at the door of the Prime Minister and her Ministers, who have driven the Health Service workers to this position. I shall return to that matter in detail later in my speech.
I return now to the statement made by the Secretary of State on 16 July. On that day, although my hon. Friend the Member for Pontypridd (Mr. John), the shadow Secretary of State for Social Services, was in the Chamber, there was no Scottish Minister present, although the dispute affects Scotland just as much as it affects any other place. I made inquiries in the Library to find out whether a circular on these important matters had been placed there by the Scottish Office. None had been and, so far as I know, that is still the position today.
I asked the authorities in the Library to contact the Scottish Office on this matter. The note dated 29 July that I received from the Library states:
No similar circular to the one sent to the English regional health authorities has been sent to Scottish authorities. Last night, a letter was sent to Scottish health boards giving revised allocations, but there are no copies of this letter in London yet—according to the Scottish Office in London.
As I am sure the Minister will concede, the Library is a very reliable source. That is further evidence to support the view that the Government treat the House with much contempt and indifference.
I have given the Minister notice of some of the questions that I now intend to ask. Others will be asked in due course. The questions of which I have given him notice will be put in slightly different terms, because of the developments to which I have already alluded.
Will the hon. Gentleman now say what revised revenue allocations have been sent to the regional hospital boards for 1982–83? Have those allocations been revised as a direct consequence of the Government's so-called final


pay offer to the nurses and ancillary staffs? Has the hon. Gentleman asked the health boards to revise their staffing plans this year and in subsequent years so that they can better pay their share of the increased pay offer? If that is so, what staff reductions does he expect from the health boards? Will they amount to an overall reduction of 5 per cent., 10 per cent. or more?
In line with his counterpart south of the border, has the Minister sent planning assumptions to the boards covering the next two financial years? What proportion of the total wage increase offered to the nurses and ancillaries will have to be met by the boards from their own resources? What does that amount to in both percentage and cash terms? Will that affect adversely the quality of the services provided? There can be no doubt that the greater the amount that must be found for wage increases out of the Government's reduced allocations to the health boards, the more the deterioration in the services provided.
I should be grateful if the Minister could quote the Fife figures. I have been in touch with the health board in Fife, but as yet have received no detailed information. That is understandable, and I do not complain about it. If the Minister cannot give the figures today, perhaps he will do so in writing.
As the Government claim that no more money is available for nurses' pay, how can cash be found to pay the police another 10 per cent. this year? I believe that the Secretary of State is in Scotland this weekend discussing this matter. However, there can be no doubt that the police will get 10 per cent., whereas the nurses, who as members of society are just as important and make an equally important contribution to our welfare, will have to be satisfied with 7 per cent. Why should that be so, bearing in mind that nurses and ancillary staff have been treated more meanly than either the police or the Armed Forces during the last three years?
The Minister should know that many nurses, particularly nurses in residence, will be worse off, net. They will be taking home less pay as a direct result of the so-called pay increase. The Minister must know that student nurses in particular, but also ward sisters, will be worse off in money terms after they have paid increased lodging allowance. Where is the justification and fairness in that?
I have with me the pay slip of an NHS storeman, who after 26 years' service takes home £45 a week. He could get more on the dole or on supplementary benefit. This is sweated labour, which occurs throughout the Health Service and affects nurses, ancillary staff, ambulance men, storemen, part-time cleaners and everyone else.
In the last few weeks I have received many letters on the NHS pay problem, not only from nurses, but from physiotherapists, radiographers and other employees of this great public service. A physiotherapist from Lochgelly states:
I wish to bring to your attention the deterioration in salary of physiotherapists employed in the NHS. In real terms what we are being offered as an increase is a pay cut—8 per cent. below the rate of inflation—and this for the third year running.
In each of the last three years these worthy citizens and conscientious workers have had their standard of living cut. That physiotherapist ends her letter:

Please note that more and more of us feel that we are treated unfairly simply because of our reluctance to take action which would harm patients. It is deplorable that this dedication to the sick should be taken advantage of by the Government.
That is not a letter from a member of Militant Tendency or the Communist Party. It is from a gentle woman doing a service to the community.
I have received another letter from the Society of Radiographers, which is not noted for its militancy. It states:
It is logically, economically and morally indefensible that our members, along with other NHS employees, should suffer poor living standards in order to retain a national health service. The Society very much regrets the industrial action currently being taken but feels that the Government's attitude towards employees whose commitment to the Service and normal reluctance to take industrial action has provoked this situation.
Those statements do not come from revolutionaries, people who want to stir up trouble or people who want to harm patients in their care. They come from people who, in desperation, have been driven to the measures that they are now taking.
The Government's assertion, which the Minister repeated on 16 July, is that
there is no more money".—[Official Report, 16 July 1982; Vol. 27, c. 1281.]
The cost of meeting the NHS pay claim in full would just allow employees to maintain their existing standard of living, given that inflation is about the same level. It is said that it would cost an extra £380 million, but that is far less than the cost of replacing the ships lost in the Falklands Island adventure. There is no doubt that the Government will find the money for that. They will not say "We cannot afford it". there is no question of the Government telling the Ministry of Defence "There is no more money". The Government are saying that the money will be found. When the Prime Minister found herself in the Falkland Islands mess, she proclaimed almost within seconds "There is no limit to what we shall spend on the Falkland Islands". Although the Minister has challenged my figure, I wager that when the full bill is paid for the Falkland Islands it will be not less than £1,000 million, and probably much more.

Mr. McNamara: Will my hon. Friend accept that the Prime Minister did not find herself in a mess over the Falkland Islands? Does he agree that she made the mess?

Mr. Hamilton: We shall return to that issue in due course, but not in this debate. Whatever caused the mess, we were in it. The Prime Minister declared that we would find the money. When she was saying that, Health Service Ministers were bleating that there was no money to pay nurses, physiotherapists, radiographers, cooks and ambulance men a living wage for working to save life rather than to destroy it.
Whenever I participate in debates of this sort, I have with me a copy of the Defence Estimates. On page 11 of the 1982 Estimates there is a short list of the projects on which we are embarking or on which we have already embarked. The estimated programme costs of the Harrier GR5 offensive support aircraft are £900 million. The estimated cost of the new heavyweight torpedo is £775 million. I am a member of the Public Accounts Committee, and I know that the new heavyweight torpedo is in addition to the new lightweight torpedo, Sting Ray, which has cost us £1,000 million. There are half a dozen or more projects in that range of expenditure. Let no Minister tell me, anyone who works in the Health Service


or anyone who enjoys the service of the NHS that there is no money. There is plenty of money. What is wanted is the will to redistribute it between one Department and another.
The Government have already announced that they are determined to go forward with the expenditure of £7,500 million on Trident. To claim that there is no more money is a rather hollow protestation. The Government are really saying that they have made deliberate policy decisions to spend more of our scarce resources on military weapons of destruction and that because of those decisions there is less money available to spend on a life-saving service like the NHS.
It is a crying shame that the least militant and probably the most dedicated group of workers in Britain—those employed in the NHS—should be admired so much by so many and paid so little for so long. They have been driven to the action that they are now taking, which Ministers and Tory Members of Parliament are exploiting as ruthlessly as they can.
On 16 July the Secretary of State spoke about his visit to St. Thomas's hospital a day or two before. He said that
at St. Thomas's hospital … As a direct result of industrial action, more than 1,000 operations have been cancelled and cancer patients among others are now waiting for treatment"—
[Official Report, 15 July 1982; Vol. 27, c. 1283.]
We could almost see his heart bleeding for those people. The fault lies at the door of the right hon. Gentleman who shed those crocodile tears on behalf of patients at St. Thomas's hospital.
If the Government were to face this problem with the same enthusiasm, determination and generosity in using taxpayers' money as they showed in the South Atlantic, the matter could be resolved overnight. That does not happen because the Prime Minister and the Government—the right hon. Lady especially—do not believe in the basic principle on which the NHS was based. The principle was that each citizen should get the health treatment that he required irrespective of his means. That is a form of practical Christianity and practical Socialism which the right hon. Lady neither understands nor likes.

Mr. Selwyn Gummer (Lords Commissioner to the Treasury): Disgraceful.

Mr. Hamilton: I agree that it is disgraceful, but it is true. It is disgraceful that the right hon. Lady should take such an attitude, but it is true that she does. She even described aid to the Third world as handouts.
All the evidence shows that the Government are swinging the pendulum as far as they can towards the extension of private provision for health services. We see private hospitals being erected all over London. They have reached Glasgow, and they are going more and more to Scotland. Less and less provision is being made for the Health Service. Low pay is driving Health Service workers into the private sector. The present strife in the Health Service concerns pay, but more importantly it concerns the future of the service itself. That is what the debate is about and I wish that more Members were present to hear it. However, we shall hear more of these issues in the next few months and years.
The British people regard the Health Service as one of the supreme examples of social progress since the end of the Second World War. They will fight to the death to preserve it, and so will we. When the Minister replies to the debate, I hope that he will give some assurances that

the Government will reverse the machine that they have put in operation. Almost daily we see abuses of the Health Service by private practice in Scotland, and to a much greater extent in England. If more resources are put into the NHS, the problems will be resolved.
The Scottish Office must not turn its back on the nurses and other Health Service workers after saying "You had better be satisfied with the existing offer that is on the table." They will not be satisfied with that. I shall be taking part with them in continued industrial action, because we care for the Health Service and the patients in it. We shall not see it destroyed by the present Government, or any other Government.

The Under-Secretary of State for Scotland (Mr. John MacKay): Perhaps it is a pity that I did not spend longer on the previous debate because the hon. Member for Fife, Central (Mr. Hamilton) might have shortened his speech. The longer that he continued, the more damage he did to his case. However, I accept that the hon. Gentleman is once again demonstrating his well-known interest in the National Health Service and the pay of its workers. This is the second Adjournment debate on National Health Service pay in 10 days and it gives me the opportunity to state clearly the Government's view on the 1982 pay round at the end of the Session, so that during the recess Health Service unions are not tempted to assume that the absence of parliamentary statements means a weakening of the Government's position.
The Government have gone some way in providing additional resources aimed at securing pay settlements in the NHS, which makes sense, against our need to keep public expenditure under close control as a key part of our economic strategy. Wages account for no less than 75 per cent. of the expenditure of Scottish health boards. It added up in 1981–82 to £850 million. That is the Scottish figure alone. The offers made in recent weeks by the management sides of the various Whitley councils ranged from 6 per cent. to 7Ċ5 per cent. for nurses and professions supplementary to medicine. The offers represent money on the table payable from last April. If the unions would return to the negotiating table and accept the pay offer, the increase will be paid as from 1 April 1982. The offer compares well with other public sector settlements—5·9 per cent. for civil servants, 6 per cent. for teachers and 6·1 per cent. for the Armed Forces.
We are subject to constant criticism that the increases offered are not fair. I believe that they are reasonable in our present economic circumstances and they are comparable with other increases in the public sector. Local authority workers could be added to the group that I mentioned. The offer is certainly comparable with wage increases in the private sector, where many people have received increases of no more than those on offer. In some cases there have been no wage increases. The constituents of every right hon. and hon. Member know that what I am saying is true.
The Government are in no position to be constantly bid up on the matter. We have made no less than £25 million available for additional pay increases in Scotland—£16 million from central Government and £9 million from the allocations to the health boards. In 1982–83, the health boards are receiving £18 million more than in the previous financial year to allow for the expansion of the service. Those are large sums, but there should be no


misapprehension that the Government have more money tucked away to meet the 12 per cent. claim. As my right hon. Friend the Secretary of State for Social Services emphasised, we cannot provide more money to improve the offers which, by present standards, are reasonable and realistic.
If one listened to the end of the hon. Gentleman's speech, one could be forgiven for believing that the Government spent less on the National Health Service than the previous Government, of which he was a supporter. I must remind him that we are spending more this year on the National Health Service than has ever been spent. Our commitment to the NHS is clear and can be seen from the figures. In Scotland, in 1978–79, £646 million was spent via the health boards on the hospital-based service. The sum envisaged for this year is £1,176 million. One does not need a pocket calculator to work out that that is a significant increase and the continual suggestions that we are downgrading the NHS are made in blind ignorance of simple arithmetic.
We walked down, as I could have predicted, the Falklands road. Before Labour Members suggest that we should not have spent that money defending the Falklands and restoring freedom to the people, may I tell them that those in my constituency who came from the Falkland Islands said that their freedom was worth defending. It is indivisible from our freedom, but that is another argument. Every time that I hear a Labour Member talking about public expenditure, the same £1,000 million supposedly spent on the Falklands is spent today on the Health Service, yesterday on something else and the day before on yet another item. It is the most elastic £1 billion that has ever been spent by a Government. Labour Members should get together and decide their line before they continue to spend the money in other ways. They must square it with their hon. Friends and many of their supporters, who believe that the money was well spent.
The hon. Gentleman asked me whether I had issued revised reserve allocations to the health boards for 1982–83 as a consequence of the Government's final pay provisions announced on 23 June. I have done that now. The Scottish Office informed the health boards on Wednesday of their 1982–83 revenue allocations that take into account the most recent pay offers. Copies of that letter have been placed in the Library together with the figures that accompany it. The table shows that the revision takes into account the reduction in national insurance payments because of the reduction in surcharge announced by my right hon. and learned Friend the Chancellor of the Exchequer, the increased allowances to the health boards for the first stage of the negotiations and the revised cash limit total for the Health Service in Scotland of £1,776 million. Fife will be given about £659,000 extra for the wage settlement that is currently on offer. That is out of a total budget of nearly £56 million, which is Fife's revised cash limit allocation for this year.
The hon. Gentleman asked me whether we have asked the boards to revise their staffing plans for the rest of the financial year. We have not done so. The Department of Health and Social Security asked its local health authorities to devise staffing plans in their regions. We work rather more directly with the providing authorities and have not felt it necessary to call for individual plans, because the size and expenditure of the Scottish boards

vary widely. No specific rules have been laid down to help boards, but they must examine staffing as well as other expenditure within the context of their new allocations.
There is another figure that is greatly at variance with the theory that the Government are running down the Health Service. Since the election, we have employed about 5,000 more nurses and midwives in Scotland, which once again shows our commitment to that service. The hon. Gentleman asked me by how much I expect the health boards to reduce staff in the current year and what my targets are. I have no such expectations of the health boards. No targets have been set for the boards. They must meet their part of the pay settlement out of the revised allocation. That is £9 million, out of a total allocation for Scotland of £1,176 million, which is a small percentage of that large sum.
I was asked whether I had issued planning assumptions to the boards for 1983–84 and 1984–85. I have not done so. The DHSS felt it necessary to provide such assumptions for its regional health authorities, but the Scottish Office deals with the basic authorities and is reviewing the future resources available for NHS expenditure.
It is too soon to arrive at a sudden decision about the operation of the SHARE arrangement—Scottish health services allocation of resources—for 1983–84 onwards which, as the hon. Gentleman knows, is an arrangement that was started by the last Government and continued by this Government to try to equalise the amounts of money that go to the different boards in Scotland.
Health boards in Scotland have been asked to produce by the autumn priorities and programmes in response to the SHARE report in Scotland. That report asks them to plan the direction in which they see the service going. As the hon. Gentleman knows, we have particularly pointed out demographic changes such as the increase in numbers of elderly people which we feel the health boards must take into consideration when planning future services.
The hon. Gentleman asked me what the total burden of the final wage offer was expected to be for the health boards. I have already answered that, but I emphasise that £9 million is required from the health boards themselves. That is less than 1 per cent. of the money that will be given to the boards this year. Different authorities will be affected in different ways. It may be that those that are only likely to receive a small increase under SHARE will have to review existing staff levels. Others may have to reconsider future increases. It is for each board to assess its circumstances and how the cost of the pay settlement will affect its development plans and prospects.
I was not surprised to be asked about the police. Negotiations on police pay have not yet begun. The police negotiating board adjourned until 5 August in order to enable the official side to clarify certain points on the future levels of local authority funding.
The hon. Gentleman made much play of the number of nurses in residence whom he claimed would be worse off as a result of the 7.5 per cent. increase. There are four categories of lodgings used by nursing staff and the charges are graded accoring to their standard and amenities. Only a small minority of nursing staff live in such accommodation. It is estimated that about 10 per cent. of the total staff do so. Those students and learners who live in qualify for a reduction of 40 per cent. of the standard charge.
An agreement was reached in 1981 with the staff side for a staged increase in charges towards realistic levels related to the cost of providing accommodation in place of the old system in which, as the hon. Gentleman knows, the charges for accommodation were related to salary. It was envisaged that the full realistic charge would be implemented in four stages. The first stage has already been implemented and the second is due to be implemented from 1 April 1982. However, the new charges will not be implemented until the 1982 pay agreement is settled.
It is not possible to argue that all nurses quoted will be worse off after the increase of lodging charges. I have requested some figures. If I take a typical nurse who lives in, probably a first-year student, her existing salary of £63 a week would be increased by £4Ċ73 with the 7½ per cent. pay award. The second stage increase on her lodgings for this year would be £2Ċ07. By anybody's arithmetic, that does not come to more than the increase that she would receive on the 7Ċ5 per cent. As I said before, only 10 per cent. of nurses pay for living-in accommodation. The remainder of the nursing staff pay for their accommodation as other people do.

Mr. Albert McQuarrie: My hon. Friend said that the second stage would come into effect on 1 April 1982 but that it would not be operative until the pay settlement had been reached. Will the charge that should be made on 1 April 1982 be backdated once the increase has been approved or will the nurses pay the increased charges only after the settlement date?

Mr. MacKay: The charges should have come into effect on 1 April 1982. In fact, they will not come into effect until the settlement has been argreed. There is no question that arrears will be recovered for the current financial year in advance of arrears in salary being paid. I hope that that answers my hon. Friend's question.
The hon. Member for Fife, Central asked about the storeman with 26 years' service. It is difficult to answer such individual questions because many other matters must he taken into account, such as whether a person is single, because that would affect the tax that he pays and consequently his take-home pay.
Many of the figures that are given are highly selective. I do not complain that the unions do that. I expect them to be highly selective because it helps their case. The basic pay of the vast majority of full-time workers in the Health Service is more than £60 gross per week. The earnings of many employees, especially ancillary staff, are enhanced well beyond that level by overtime payments, incentive bonus allowances, unsocial hours payments, and so on.
The gross earnings of a full-time male ancillary worker average out at £104 a week. That inevitably means that, while some are receiving more than £104 a week gross, others will be receiving less than that.

Mr. William Hamilton: The Minister is being selective.

Mr. MacKay: I am not being selective in the average. The average is the average. There is no selection in that figure. The average is £104 a week, and even a basic knowledge of arithmetic tells one that one does not select when one computes an average. All the wages paid are taken into account.
The Government have ultimate responsibility for deciding levels of public expenditure. They cannot hand

over the responsibility for that decision to another body to allow it to arbitrate and perhaps to come to some compromise decision which will pay out more than the Government judge the country and the Health Service can afford. That is the position on arbitration.

Mr. McNamara: How does the Minister justify that principle against other public sector claims that have gone to arbitration?

Mr. MacKay: Each group must be taken on its merits and its background. The Government have offered a large sum of money to the nurses and other ancillary workers in the dispute. The Government's duty is to make difficult judgments and we judge that neither the economy nor the Health Service can afford to pay more in salaries than the extra money that we have put on offer.
National Health Service pay negotiations are neither simple nor straightforward. In Britain the National Health Service has about 1 million employees with a wide variety of skills and experience, all of which are required to run a modern and successful Health Service. We must make every effort to avoid damaging the interests of patients and causing distress and suffering. The unions' continued action is undoubtedly causing serious damage in Scotland and other parts of Britain.
There are many examples of actions by small numbers of workers in hospital laundries that are seriously curtailing the supplies of clean linen to hospitals. Glasgow has been one of the worst affected areas in recent weeks. A fortnight ago I visited the Yorkhill and Gartnaval hospitals and saw at first hand the effects on patients and on nursing and other staff who are striving to maintain a decent standard of care. Patients are having to manage with paper sheets on their beds day after day. Staff cannot change the linen as often as they would wish. In long-stay hospitals the lack of clean clothing has meant that patients must be kept in bed all day. Linen supply problems hit hardest the hospitals for the elderly and the mentally handicapped, because many of their patients are incontinent.
No one can argue that disruption of laundry work can be consistent with the aim of respecting patients' dignity enshrined in the unions' guidelines. I leave it to the House to imagine the effect of piles of contaminated laundry lying around hospitals during the recent spell of warm weather. There are not only piles of contaminated laundry but polythene bags with varying kinds of waste, including hazardous waste, piled up in the corridors of hospitals. That is not the way to run a health service.
The unions make much in public of their wish not to hit essential services and accident and emergency care, yet throughout the dispute there have been examples of all catering staff walking out of hospitals and leaving management to cope as best they can with feeding patients, using nurses and other volunteers to prepare and distribute food.
Occasionally, for example at Hairmyres hospital, it proved necessary to appeal to relatives and friends to bring in food for patients during the union's day of action. No one can argue that the unions are not interfering with essential patient care. They have forced the cancellation of routine admissions and the postponement of out-patient clinics. In addition, pickets have delayed the flow of mail between general practitioners and hospital consultants. It is not just a statistical probability that some patients will


suffer from the delay in diagnosing and treating serious illnesses: it is a certainty. Many patients waiting for such operations as hip replacements are having to wait much longer than they should.
The other day I met one of my constituents whose admission to hospital was long overdue. He was not over-sympathetic to the unions' case, because it had led him to wait an unnecessary length of time. In the NHS, any form of so-called industrial action is bound to affect the health and well-being of those who are acutely ill, the elderly and the handicapped in need of hospital care. It is no use the unions trying to pretend otherwise.
Fortunately, most nurses and many other NHS workers have continued to put the interests of their patients first and have not taken part in the strike action or in the walkouts. Many of those staff have taken on work that far exceeds their normal duties in the attempt to sustain services to patients. We all owe them the greatest respect, because they have upheld the finest traditions of caring for the less fortunate in our society.
At this stage in the parliamentary Session, perhaps I might conclude by quoting from paragraph 5 of our circular to the Scottish health boards:
I should emphasise that the Government does not propose to depart from the pay settlements now on offer and will not make any further resources available towards their costs.
I do not know how many times my right hon. Friends and I will have to say that—

Mr. William Hamilton: Disgraceful. Shame.

Mr. MacKay: I do not know how many times we will have to say that before the unions will return to the negotiating table and negotiate within the amount of money available to settle the dispute. Let us get the Health Service back on the road so that the greatly increased sums that the Government have invested in the NHS since the last election and the increased staff that have entered the Health Service in the past three years can be put to the proper work of attending to patients and seeing to patient care.

Orders of the Day — Interest Rates and Debt

Mr. John Browne: I am grateful that my subject has been selected for an Adjournment debate and that I now have the opportunity to make the speech that I was unable to make when the business of the House unexpectedly collapsed about three weeks ago. Also, I thank my hon. Friend the Minister for having given up his valuable time to attend the debate.
I should declare an interest, because I am a director and adviser to companies within the United Kingdom's financial and banking industries. However, although I am associated with the United Kingdom's financial system, I shall not speak on behalf of any interested groups of people, and in formulating my speech I have not consulted potentially interested parties.
The United Kingdom's financial system is a vital part of our national economy in which it has played and continues to play a most important role. Indeed, the health of our economy is inseparably linked to the health of our financial system. As an international trading nation, both our financial system and economy are dependent on United States interest rates, on trends within the American economy and on the health of international financial markets. The serious and adverse pressures now being exerted on American interest rates, on the American economy and on international financial markets should cause grave concern to us in Great Britain. Our financial system is greatly affected by, and has to exist as part of, the international financial system.
In addition to the problems of past stagflation and the current deepening recession, the international financial system faces two new and major challenges. First, it faces the prospect of continued high, and even higher, American interest rates. Secondly, it faces the problems of Third world debt and the increased chances of major formal defaults. In short, the international financial system now faces serious threats not merely of illiquidity, but of insolvency. It is vital that we should not shrink from facing those problems. Indeed, it is our duty to face them and to prepare to deal with them.
I am particularly concerned that these outside threats affect the United Kingdom's domestic financial system. I shall press my hon. Friend the Minister for safeguards to ensure that our regulatory authorities are ready and equipped, both legally and financially, to deal with those potential problems.
The American economy is the largest and most influential in the world. The American dollar is the most widely-held and important currency, and American interest rates obviously affect us all. We are living at a time not only of historically high American interest rates, but of great volatility in them. That volatility is due largely to the American system of monetary-base control. However, international markets are constantly taken aback by the continued high and upward trend in American interest rates.
Naturally, I agree that very few trends occur in straight lines and any downturn in American interest rates—such as that experienced earlier this week—are eagerly read in the markets as a signal of a major downturn in those rates. Why are markets so keen to read a major change in the upwards trend of American interest rates? Obviously, massive profits can be made by those who pick the turn


in a major trend in interest rates, and at these historically high dollar rates fortunes could be made if the turn was picked correctly.
However, my main contention is that the market and the media are focussing on the wrong basic figures. Today, the market perceives the size of the United States federal budget deficit as the main influence on American rates. There are, of course, other influences such as relative inflation rates, commercial demand for US dollar oil payments, tight money policies and so on. Nevertheless, it is generally believed that the main influence in the market place is the size of the American budget deficit. That deficit is generally believed to be a staggering $100 billion for the fiscal year 1983, having doubled during the past 12 months. In other words, the declared figure has increased from under $50 billion to more than $100 billion over the past few months.
I submit that the present American interest yield curve reflects that perceived deficit of about $100 billion. The devastating point is that if one looks not merely at the publicised deficit but at the detailed figures deep within part IV on page 10 of the American budget statement for the fiscal year 1983, one finds that the real—as opposed to the apparent—American deficit is at least twice that figure, or $200 billion. If all off-balance-sheet items are included, the figure is probably three times the presently perceived American deficit.
If today's United States yield curve is based on an apparent Government deficit of $100 billion, we must be greatly concerned as to what the yield curve would look like if it were based on the true American budget deficit of between $200 billion and $300 billion. I submit that uncertainty over the trend of American interest rates has been due largely to the fact that the financial markets and the media have wanted to believe that American rates would fall. That belief stems from the fact that, while many are able, few people have actually looked at the source figures for the American deficit. For the benefit of the House I shall illustrate what I mean by the real numbers, as they pertain to the American deficit.
Of course, I appreciate that there are no hard numbers in national budgeting—the figures are constantly fluctuating—but these are, to coin a phrase, the real, soft numbers. All of them are based on publicly available information in the United States of America. I shall cite the "Economic Indicators—May 1982" which was prepared for the joint economic committee and published by the Council of Economic Advisers of the ninety-seventh congress, second session. I refer particularly to page 32. I refer to "Special Analysis E on Borrowing and Debt" published by the Office of Management and Budget 1982, page 35; "Appendix to the Budget for the Fiscal Year 1983" part IV page 10; and "Special Analysis F—Federal Credit programs. The Budget of the United States Government 1983"—published by the Office of Management and Budget February 1982—pages 24 and 25.
I have taken the figures out of those books, and particularly from the references that I have given, which are based on February 1982 United States budget data with congressional revisions to June 1982. If one rounds them up for speed and simplicity, one could say that the actual United States federal deficit is not $103 billion as openly declared, but at least $211 billion with estimated allowances for it to go up to a possible $345 billion.
I have taken the regular United States budget deficit as published at $103 billion—although I hope to show later that even that figure is conservative and is beginning to be seen as such in the international press—and halve added three more key figures. First, if we take the net off-balance-sheet federal entities of about $19 billion we bring it up to about $120 billion. If we add the net federal guaranteed Government borrowing of entities such as the federal financing bank, federal guaranteed loans and national mortgage association, we add a further $44 billion bringing the total to about $164 billion. If we add the net borrowings of Government—sponsored enterprises—a further $47 billion—we have a total deficit of $211 billion.
Worse still, the conceptual figures that are openly written into the budget published by the United States Office of Management and Budget show a discrepancy of no fewer than $345Ċ7 billion between the estimated total of federal and federally assisted borrowing for the fiscal year 1983 of $1Ċ473 trillion and the gross federal debt or statutory debt ceiling of $1Ċ127 trillion.
As I said, I took the base figure of the regular budget deficit at $103 billion, but recent press reports have begun, at last, to show that this figure is somewhat conservative. In the Financial Times of 28 July there is an article by Anatol C. Kaletsky, in Washington, showing that the United States budget deficit in 1983 is likely to be between $141 billion and $151 billion, and the deficit for the next two years will remain in the region of $145 billion and $160 billion. That is corroborated by the International Herald Tribune, which published a report on the same day. The congressional Budget Office on the Tuesday preceding 28 July said:
That budget deficits could reach a minimum of $140 billion for each of the next three years, far above even the revised estimate of the Reagan administration.
Then we see in the Financial Times of 29 July:
The US Treasury announced last night that it will need to raise a record $50Ċ5 bn during the third quarter of this year.".
It is interesting that, on an annualised basis, this reaches the $200 billion mark.
Some people argue that those American figures have been doctored for political reasons, and that the Office of Management and Budget published deliberately high figures in order to alarm and so persuade the American Congress to cut back on federal spending. I find it not only unrealistic but outrageous to suggest that the American Government would deliberately publish misleading figures in their budget. That argument should therefore be discounted. Other people say that the United Stales Government can take corrective action to lessen their deficit. I agree with that in the long term, but what about the short term? The International Herald Tribune of 29 July said:
President Reagan has determined that he should not have to adhere to the ceilings on military spending for 1984 and beyond that were imposed by Congress with White House blessing last month".
That means that President Reagan is most unlikely to cut back on military spending.
The present United States interest rate structure tends to reflect, among other things, the perceived United States deficit of about $100 billion. However, I hope that I have illustrated that the United States deficit is actually between $200 billion and $300 billion. When that becomes apparent, surely it can be expected that United States interest rates will rise


Naturally, many people in the United States of America feel that it would be political suicide for the Republicans to go for a mid-term election with interest rates at their current levls, let alone at higher levels. They believe that American politicians will reduce interest rates for political reasons. That assumes, of course, that it is possible for the American Government to reduce interest rates even with the co-operation of the Federal Reserve Board. Those who believe that it is possible point out that President Reagan could delay his proposed tax cuts for one year, raise the age limit for entitlement to certain social benefits and even cut defence expenditure and raise more taxation.
I have dealt with the possible cuts in defence expenditure, which appear to be unlikely. Even if it were possible to do any of those things, it is estimated that the total yield of all those possible actions would be only between $40 billion and $70 billion, or less than one-fifth of the upper estimated United States Government deficit for 1983, which starts on 30 September 1982—in two months' time.
This all leads me to the conclusion that the American debt deficit is effectively out of control, at least in the short term. Furthermore, if the American interest rate structure is currently influenced most heavily by the size of the deficit, then American interest rates are effectively out of political control in the short term. Therefore, they are likely not only to stay high, but to rise during the next six months to one year.
I believe that whilst few events such as interest rate movements follow straight lines—there are fluctuations—there will be no overall, upward trend in United States interest rates in the short to medium term. The effect of continued high interest rates will be to exert upward pressure on other international interest rates including sterling. The result is likely to be that the recession being experienced in the United States economy will deepen. That will adversely affect the economies of other trading nations. The recession in the United States economy is already causing serious strain in its financial community. Over 300 American financial institutions are currently under supervision, and conversations with American bankers show an alarming level of potential bankruptcies among United States corporations, even large ones, some of which are experiencing serious difficulties.
The other main threat facing the international community, of which we are an integral part, is the risk of major loan defaults.
Unlike the Korean war, which was financed by tax revenues, the American Government financed the Vietnam war by means of deficits. It was these massive United States dollar deficits that caused the considerable growth in the Eurodollar market or the market in United States dollars held by non-United States citizens. The oil hike, begun in 1973, added greatly to this growth of the Eurodollar market following the OPEC demand that oil should be paid for only in United States dollars. The result was a massive accrual of United States dollar deposits with Western banks. At the same time Third world countries needed more money for development because of inflation, and to pay for greatly increased oil import costs.
Furthermore, as industrial growth fell off in the Western world in the 1970s the demand for corporate loans began to ease in the Western economies. It was, therefore,

tempting for Western bankers to pursue loan mandates in the Third world and to participate in syndicated lending to the Third world.
Most of the weight of petrodollar recycling was, therefore, carried out by commercial banks rather than by development banks which, because they are Government owned, with an access to a tax base, are assured of continued solvency. The route that the recycling should have taken—through development banks to sovereign borrowers—was a proven and solvent route, but, for some reason, the petrodollar recycling went instead through the commercial bank network which does not have access to tax and, therefore, always faces the risks of illiquidity and insolvency.
Furthermore, the bulk of petrodollar recycling was carried out largely by means of loans from commercial banks rather than by means of bond issues. There is one great disadvantage when sovereign borrowing is carried out in that way. In a bond issue, which is widely syndicated, the borrower is at arm's length from the lender or purchaser of the bond and is, therefore, under a firm obligation to fund the bonds. Any suggestion of default would ruin the borrower's credit rating in the market for bond issues.
On the other hand, when a borrower borrows by means of bank loans he is in direct contact with the lender or commercial bank and is thus in a position to exert pressure on the lender or even groups of lenders in lending syndicates. That pressure can be used to force lending banks to make additional, imprudent loans and to accept unwillingly arrangements such as rescheduling and moratoriums on existing loans and even rescheduling of interest, let alone of principal.
One of the great pressures is the prospect of the lending bank being helped to do more business in the country concerned. Obviously this can make things easier for the commercial bank. However, the real pressure that such countries bring to bear on banks that have already lent them a lot of money is the threat of a formal default. There is an enormous legal difference between an informal default and a formal default. A formal default carries with it far more serious financial implications in terms of accounting, reporting to regulatory authorities and the making of provisions than does an informal default.
As is widely documented, sovereign borrowing of Third world countries has risen at least fourfold in the past 10 years. I shall not waste the time of the House by itemising the borrowing of individual countries, but three examples are Argentina at $37 billion, Brazil at $85 billion and Poland $27 billion. Those are loans of staggering proportions in relation to the underlying economies of those nations.
The size of such loans in relation to the capital base of the financial institutions that hold them on their books as assets should give us cause for serious concern. The problems of normal debt service on those loans are serious enough, but the implications of a formal default give us even more cause for concern, not only for the liquidity of the international financial system, but for its solvency.
Throughout the past 10 years or so, the domestic regulatory authorities or central banks have shown little sign of exercising much control over acts of imprudence within the Euromarkets. It is fully appreciated that freedom from regulation was one of the main reasons for growth in those markets, but it is felt that they have grown


to such proportions that any banking failures within them would have a substantial effect on our own and other people's domestic financial institutions.
It could be argued that the unregulated growth in the Euromarkets has occurred largely on the back of the underlying credit of the domestic financial institutions. Not only do such institutions stand liable for their world-wide branches, under the custom of ultimate parental responsibility, but it is often difficult for the managers of such institutions to know the true nature of their risk exposure, especially as regards sovereign borrowing. That point was illustrated vividly by the difficulty that certain banks had in itemising their exposure to Argentina when we froze Argentine assets earlier this year.
For example, a bank may have made direct loans to country A. In addition, it may have managed syndicated loans to country A or have participated in such syndicates. I term those as primary risks. More problematical are what I term secondary risks, where a bank has perhaps made loans to corporations that have commercial business with inherent political risk exposure to country A. In addition, the bank may have managed or participated in financing projects managed by reputable Western companies which also have an inherent political risk exposure to country A. Finally, the bank may have foreign exchange and short-term money market exposure to other banks with similar, but unknown—to the money market—exposure to country A.
The total profile of a bank's primary and secondary political risk exposure to country A is difficult to monitor and measure, even if all the loans are made from one head office or branch. The problem is magnified even more when one recognises that many international banks have exposure undertaken through a world-wide network of branches.
Furthermore, many Euromarket loans are either managed from, or booked to, branches of Western banks situated in offshore financial centres. The domestic head office is ultimately responsible for the activities of those branches, but the role of lender of last resort in many offshore centres is unclear, to say the least. The recent example of the Banco Ambrosiano is just one example. In short, much business is carried out in offshore financial centres on the back of the credit of domestic financial institutions.
When one considers the present economic situation facing the Western world, with zero growth predicted for 1982, and 30 million people already unemployed in OECD countries, one can see the true seriousness of an expected rise in United States and, therefore, international interest rates and its implication upon our domestic banking structures.
If one adds to that the enormous problem of international debt and distressed borrowing by major corporations within domestic economies, which often lead to an unexplained increase in money supply growth rates, one begins to see the emergence of a serious picture of potential illiquidity and insolvency problems among international financial institutions.
At the margin, which is often the critical area—the straw that breaks the camel's back—one also notices an accrual by Soviet countries of United States dollars that they have received in return for arms sales and so forth. It appears that many of those dollars are not being recycled to the Western financial system, but are being used for

settlement within Comecon. If that is true, it represents an important net destruction of United States dollar liquidity at the margin, which could have serious consequences.
We must ensure that, in case such illiquidity and insolvency problems materialise, the Western financial system and particularly the United Kingdom financial system are as insulated as possible from them. That means that the Government must face the possibility of illiquidity and insolvency problems within the financial system and take appropriate preventive and protective measures.
I should like to ask my hon. Friend the Economic Secretary some specific questions. I am sorry that 1 have taken a long time and I shall understand if my hon. Friend feels that I have not left him enough time to answer my questions, but I should be grateful for written replies to these questions of which I have given him prior written notice.
First, do the Government agree that the major central banks—the group of 30—should ensure that they are both ready and legally able to deal not only with an illiquidity crisis but also with an insolvency crisis in the banking and financial industries? Does he believe that it would be advisable for the group of 30 to establish a major international safety net of usable liquid funds that could be deployed by central banks to mediate in problems of illiquidity and therefore avoid any risk of insolvency?
Secondly, will the Minister comment on the security of deposits in United Kingdom banks and the position of the Bank of England as lender of last resort both within our own system and particularly with regard to offshore branches of domestic British banks?
Thirdly, will the Minister comment on the custom of ultimate responsibility of British banks for their offshore branches and the responsibilities that their head offices should exercise, particularly with respect to major offshore financial centres where the local lender of last resort may or may not share the same criteria and sense of obligation as is shown by the Bank of England in Great Britain?
Fourthly, in return for commitments as lenders of last resort by central banks, will the Government support the motion that major central banks should exercise more regulatory control over the Euromarket?
Fifthly, in an effort to curb the headlong and unrestricted growth of high risk sovereign borrowing, would the Government support the notion that the group of 30 central banks should establish a quota system for Third world sovereign borrowers using the facility and credit of Western banks? I suggest that under such a system each sovereign borrower should be granted a quota by agreement among the central banks and the Third world borrowers could then raise its loans within their individual quotas by tendering from within the international banking community.
Under such a system, the group of 30 could force potential borrowers to disclose more relevant data and thus enable Western bankers to exercise proper due diligence before granting loans. It would also be possible gradually to reduce the loan exposure of Western banks to high risk sovereign loans and move it more towards development banks where it would be more correctly placed. Furthermore, any sovereign borrower who borrowed without being on the approved list or borrowed in excess of its agreed quota would do so with the lending bank knowing that loans made under such conditions would be rendered unprotected by the lender of last resort facilities from the central banks of the group of 30.
Sixthly, will the Government act formally to support the harmonisation of EEC financial accounting according to EEC document No. 1129/76 and press specifically for disclosure by banks with regard to reserves, for improved declarations of direct sovereign lending and a more realistic declaration of the status of loans—that is, whether they are non-performing or effectively in a state of informal default?
Seventhly, will the Minister comment on the status of the British freeze of Argentine assets?
Eighthly, will the Government support the establishment of a code of conduct to be observed by all IMF member banks in the event of their freezing the financial assets of another Government? Could such a code of conduct be designed to prevent extra-territorial claims, the right of set-off and the waiving of sovereign immunity as was exercised by the United States Government in the freezing of Iranian assets?
Ninthly, does the Minister agree that, although the international financial system now faces severe constraints, British banks have two major advantages—first, that they have been generally more cautious and financially prudent than many foreign competitors, and, secondly, that they have the outstanding back-up of perhaps the most experienced and sophisticated central bank in the world?
Tenthly, will the Minister agree to urge our right hon. and learned Friend the Chancellor of the Exchequer to avoid any further taxes like the recent windfall profits tax which serve to erode the capital base of and confidence in the British banking system in an extremely hostile and high-risk international environment?
Finally—looking back at those questions, I am glad that I gave my hon. Friend advance notice of them does the Minister agree that it would be in the interests of the Western economies to avoid any foolhardy and simplistic pressures to trigger a massive sovereign loan default such as that currently proposed in the United States by the Kasten amendment in relation to Polish loans, which seeks to force the United States President to trigger a formal default of all Polish loans outstanding to American banks? Does the Minister agree with me that that would be disastrous for the world?

The Economic Secretary to the Treasury (Mr. Jock Bruce-Gardyne): I must congratulate my hon. Friend the Member for Winchester (Mr. Browne) on obtaining this debate and his achievement in putting his important views on these matters on the record—at, I believe, the fourth attempt. The matters that my hon. Friend has raised are of considerable importance, topicality and concern to us all. It would be foolish to deny the existence of anxieties about high real rates of interest on the international economy and on the stability of international banking system in particular.
I wonder, however, whether my hon. Friend is right to assume that the markets in the United States cannot peer behind the published figures for the federal deficit and draw the kind of conclusions that he drew about the importance of so-called off-balance-sheet items. I suspect that it is precisely the awareness of the extent of such items that has caused the reluctance of American interest rates to move downwards, notwithstanding the rather dramatic

fall in the level of American domestic inflation. The published federal deficit as a proportion of the nation's GDP is very modest.

Mr. John Browne: I agree that the figure is apparently modest, but the savings rate there is much lower than that in Western Europe. As for other financial institutions looking at the figures correctly, I can only say that they certainly do not publish them. When they talk to their clients, American stockbrokers and investment banks always still focus on a figure between $100 billion and $140 billion, and although the information is published it takes a great deal of finding.

Mr. Bruce-Gardyne: On the ratio of the published deficit to the American savings level, my hon. Friend has anticipated me. I was about to make precisely that point. Although the savings ratio is low, one would have thought that with inflation down to low single figures there would be a tendency for the savings ratio to be reconstituted. I do not underestimate the anxieties expressed by my hon. Friend, which are widely shared, but I think that it is a mistake to assume that the American financial markets cannot make calculations of the kind that my hon. Friend has presented to the House today.
On sovereign borrowing, again, the anxieties that my hon. Friend has expressed are widely shared. It is not all that different from the old proposition that if a customer has an overdraft of £100 the bank owns him, but if he has an overdraft of £100,000 he owns the bank. It is true that the scale of indebtedness of some of these countries presents the possibility of pressures on the commercial lenders that it may not always be easy for them to resist.
I wish now to turn to the questions that my hon. Friend has posed. I shall endeavour to answer as many of them as time permits. Before doing so, I should put on record two propositions that I regard as background. It must be in the interests of all to see fulfilled the determination of the present United States Administration to prevent a fresh surge of inflation fuelled by excessive monetary laxity. The sheer weight of the United States economy means, as we saw to our cost in the early 1970s, that accelerating American inflation, fuelled by the manner in which the Vietnam war was financed, swiftly feeds round the international system.
While we in this country cannot hope to insulate ourselves from the impact of interest rate movements elsewhere in the world and especially in the United States, responsible fiscal and monetary policies at home give us some freedom of manoeuvre that would be denied us if our domestic stance was perceived to be one of budgetary laxity such as suggested by Opposition parties. The proof of the pudding is in the eating. At the beginning of this year, United Kingdom interest rates were two points higher than dollar rates, whereas today they are a point lower. Yet our effective exchange rate is stable and inflation is falling rather faster than most commentators were predicting even at the time of the Budget.
The moral of this experience is that excessive deficit financing is debilitating at home and potentially damaging abroad. I share my hon. Friend's concern about the size of the United States federal deficit on-budget and off-budget. I assure him that my right hon. and learned Friend the Chancellor of the Exchequer has voiced the sort of anxieties that he has expressed about the impact of very high real rates of interest resulting in New York, not only


upon the prospects of recovery in advanced industrial countries but also on the indebtedness of less developed countries.
My hon. Friend asked about the case for the group of 30 to establish a major international safety net of usable funds that could be deployed by central banks. There has been a substantial development of co-operation among supervisory authorities in major countries. This in itself offers us considerable reassurances. It is not possible to tell in advance what response, if any, would be appropriate from the authorities in any case of insolvency of an individual institution, but the immediate risk of such an insolvency causing more general problems lies in its possible effects on liquidity. I agree with my hon. Friend. The governors of the group of ten countries have stated publicly that means are available for the provision of temporary liquidity to the Euromarket and would be used if and when necessary.
My hon. Friend asked about the security of deposits in United Kingdom banks and the position of the Bank of England as lender of last resort. Depositors with United Kingdom recognised banks and licensed deposit-taking institutions are covered by the deposit protection scheme under the Banking Act 1979. This provides cover for 75 per cent. of the first £10,000 of a depositor's sterling deposit with any of these institutions. It would be wrong, in our view, for the authorities to remove responsibility altogether from the depositor by providing 100 per cent. cover for deposits or blanket assurances of support regardless of circumstances. The Bank of England has acted as lender of last resort to the banking system in the past and will, I am sure, stand ready to do so where appropriate in the future.

Mr. Browne: rose—

Mr. Bruce-Gardyne: I hope my hon. Friend will forgive me. If he wishes me to answer his questions, I think that I should proceed. I am sorry, but I do not think that I have time to give way.
My hon. Friend asked about the ultimate responsibility of British banks for their offshore branches and the responsibilities that head offices should exercise, particularly in respect of major offshore financial centres. Our banks are legally responsible for the activities of their branches. The Bank of England, which has statutory responsibility for the prudential supervision of the British banking system, supervises British banks on the basis of their total world-wide business, including that of branches and subsidiaries. The Bank of England is confident that British banks are aware of their responsibilities in respect of their overseas activities.
My hon. Friend asked whether Her Majesty's Government would support the motion that major central banks should exercise more regulatory control over Euromarkets. The Euromarkets are already effectively subjected to supervision and control from a prudential point of view. Banks in all major banking centres and their activities elsewhere in the world are covered by one supervisory authority or another. My hon. Friend asked whether the group of 30 central banks should establish a quota system for Third world foreign borrowers. We do not consider that this is either appropriate or possible. It would not be possible for any one institution to say how much any country should be allowed to borrow. It is for the individual bank to ensure that it does not on-lend

money to borrowers who cannot repay it. I realise that this is easier said than done. We do not think that it is either possible or appropriate for a particular institution to establish a sort of pecking order of sovereign borrowers.

Mr. Browne: rose—

Mr. Bruce-Gardyne: I am sorry, but I cannot give way to my hon. Friend.
My hon. Friend says that the IMF already does this. Of course the IMF has a role. It is crucial that it should have a role. We support the IMF in exercising that role, but it is different from the establishment of a specific quota system or a pecking order in which sovereign borrowers should be made to queue. We do not think that this is appropriate or possible.
My hon. Friend also asked about proposals for harmonisation of EEC financial accounting procedures. I take it that my hon. Friend is referring to the draft EEC directive on annual accounts of credit institutions. As my hon. Friend knows, the Government support the principle of harmonisation within the Community in this respect. Our attitude on hidden reserves is that the onus of proof is on those who wish to maintain them to make the case for doing so. I believe that my hon. Friend referred to these matters and also to direct foreign lending and the status of loans in the Second Standing Committee on European Community Documents a fortnight ago. My hon. Friend the Minister for Consumer Affairs told him in reply, I believe, that the Government were grateful for the suggestions and thoughts that he put forward and that they would be studied with interest and taken into account in deciding the United Kingdom's stance on the EEC draft directive.
My hon. Friend asked me to comment on the status of the British freeze of Argentine assets. This matter is currently under consideration. I do not think that it would be helpful for me at this stage to go into further detail.
My hon. Friend also asked about the establishment of a code of conduct to be observed by all IMF member banks in the event of their freezing financial assets of sovereign Governments. A code of conduct implies that financial asset freezes will become regular affairs. We do not foresee that. We do not wish it. Of course, there may be extreme circumstances when a freeze of financial assets has to be imposed. There have been two occasions in the past three or four years when this has happened. It would not be helpful to spell out circumstances in which such a freeze could or should be imposed or the method of its application.

Mr. Browne: Will my hon. Friend give way?

Mr. Bruce-Gardyne: I am very sorry. I cannot give way to my hon. Friend. There are still one or two more questions that he has asked. If he wants answers to his questions, he must allow me to complete what I have to say, and he has not left me much time to do so.
My hon. Friend asked me whether I agreed that, while the international financial system faced severe strains, our own banking system was a good deal more strongly and securely placed. It is fair to say that British banks have benefited from taking a relatively cautious view, and I have no doubt that the prudential supervision of the Bank of England has played a useful role in that. It is possible to argue that we had our experience with lending problems in the mid-1970s and that perhaps we have learned lessons from them.

Mr. Browne: May I put to my hon. Friend a brief point of information? On the code of conduct, I was not getting at conditions under which a freeze would be instituted. I was pointing out what must not be done in a freeze, such as right of set-off and waiving sovereign immunity.

Mr. Bruce-Gardyne: I have to say again that I do not think that it is practicable, possible or necessarily desirable to spell out the precise nature of the methods to be used in the case of a freeze of financial assets, not least because we do not want to establish the idea that this is to be part of the normal course of events. We hope very much that it will not be.
My hon. Friend asked about domestic banking taxation. I do not accept that the 1981 special tax on banking deposits had the effects suggested by my hon. Friend. I did not accept that when I was on the Back Benches at the time.
As for the future, my right hon. and learned Friend has made it clear that further thought needs to be given during the current financial year to the problem of how best to ensure a sufficient contribution to the Exchequer from the banking sector. He approaches this with an open mind. I can assure my hon. Friend that all the relevant factors are taken into account in this review, but I cannot give him any idea at this stage of the outcome. We are aware of the factors which my hon. Friend mentioned, and I assure him that they will be taken into account.

Mr. Browne: Will my hon. Friend give way?

Mr. Bruce-Gardyne: I cannot give way to my hon. Friend again.
My hon. Friend asked whether I agreed that it would be extremely foolhardy and against the interests of Western economies to adopt the proposal contained in the Kasten amendment for sovereign loan default in the case of Poland. We are entirely at one about that. That would be a very mistaken way of proceeding.
The world is passing through a transition from a period of very high and rising inflation rates to a period perhaps of much more stable money and lower inflation rates. Inevitably, there are financial transactions which in the previous period appeared to be good sense but which in the very changed circumstances of a much lower and more stable regime of inflation internationally are bound to look very different today. It is essential that we get through this phase of transition. It is not without risks and dangers, and I accept my hon. Friend's warnings, but the prospects for the world economy must be substantially better in the long term once we have gone through this transition and moved back to a period of much more stable prices and much lower inflation, as I believe we shall be doing.
The essential role of the Government is to act in concert with our allies and our trading partners to make sure that the sort of risks to which my hon. Friend referred are taken fully into account. At the same time, we should not indulge in exaggerated expectations or fears about the extent of the risks that we face.
We can at least feel with some reasonable confidence that we in this country, thanks to the prudent management of our affairs by Her Majesty's Government, are much more soundly and solidly placed than some of our neighbours, and we hope that they will take notice of our example.

Orders of the Day — Extradition (Irish Republic)

Mr. John Ryman: I wish to draw attention to the problems arising in the implementation of extradition arrangements with the Irish Republic. I am glad to see that the Minister of State, Home Office is here to give the Government's views. I shall be mercifully brief. I have four points to make. In the wake of the recent IRA outrages in London, the problem has become extremely acute once again. My four points are: first, the problem; secondly, the long-term solution; thirdly, the interim period; and, fourthly, the Government's plans.
The problem can be stated very simply and has been stated on a number of occasions recently in the House and elsewhere. In the House on 26 April the Attorney-General said in reply to an oral question:
I have always made it clear that the ability of terrorists to shelter behind the exception of political offenders is one of the major obstacles facing us. The Irish side is well aware of this. A number of ways of overcoming the difficulty are available and they were discussed during my previous talks.
The right hon. and learned Gentleman was referring to previous talks with the Irish Attorney-General.
However, I am not prepared to go into details of what were private and confidential discussions."—[Official Report, 26 April 1982; Vol. 22, c. 607.]
The background was that as long ago as 9 November 1981 the Secretary of State for Northern Ireland said in a written answer:
Although the police believe that some people whom they would like to interview in connection with terrorist crimes committed in the United Kingdom are now in the Republic, it cannot be said for certain where they all are.
Since 1969, arrest warrants have been forwarded by the Royal Ulster Constabulary to the Garda Siochana in relation to 82 cases connected with terrorism. As a result one person has been extradited; the suspect was returned to Northern Ireland in 1976 and was subsequently convicted of arson. The Irish courts have refused extradition on 45 occasions. The reasons given for these refusals and the outcome of the remaining warrants have been as follows:
subject arrested in the Republic of Ireland but extradition refused:


(i) on the grounds that the offence was political
34


(ii) on the grounds that no comparable offence existed within the Republic
9


subject arrested in the Republic but habeas corpus granted
2


Warrants refused
45


Other warrants:



subject arrested in United Kingdom
17


subject prosecuted and imprisoned in the Republic
1


warrants later withdrawn by RUC
12


warrants not yet executed
6"


—[Official Report, 9 November 1981; Vol. 12, c. 45.]
Those figures state the problem, which can be formulated in the proposition that, in the vast majority of cases, terrorists who commit serious criminal offences in the United Kingdom and elsewhere, and then leave the jurisdiction of our courts and subsequently are arrested in Ireland, successfully raise a political defence if extradition proceedings are taken. That defence has a long and respectable history in the law of extradition, but it has no place in modern times when we are dealing with professional criminals who pretend that they are achieving political ends by committing serious criminal offences in Britain.
The position of the Republic of Ireland has always been special and the reasons for that are varied. It can be summed up by quoting from "The Law and Practice of Extradition":
The Republic of Ireland is treated for the purpose of extradition as a special case. Although not part of the Commonwealth, it is treated as a designated Commonwealth country by the United Kingdom dependencies for the purposes of requests made to them by the Republic for accused persons found in the dependencies. In relation to the United Kingdom the position is wholly exceptional. The physical proximity of the Republic to the United Kingdom, the ease with which its citizens have customarily been allowed to come and go and enjoy civic rights in Britain, and the common origin of most of its law with the United Kingdom, justifies special treatment for the return of accused persons one to the other. Most of the general principles of extradition law apply, however, except for the specialty rule and the need to prove a prima facie case.
That general principle of law has been applied for a long time and was applied recently in the High Court of Justice when, on 13 March 1982, Mr, Justice Forbes and Mr. Justice McCulloch, in a case called In re McFadden, reported in "Times Law Reports" on 13 March 1982, in the Divisional Court of the Queen's Bench Division that
the rule of international law known as the specialty rule, that no one should be prosecuted for any matter following extradition other than that for which the extradition had been requested, did not extend to the special arrangements made under the Backing of Warrants (Republic of Ireland) Act 1965 and the corresponding Irish legislation whereby, instead of extradition, matters were dealt with by mutual application of each country's warrants.
Therefore, the history, as interpreted very recently, discloses that the Republic of Ireland is in a very special position. Although it is in a special legal position, the plain fact is that terrorists are committing outrages in the United Kingdom and can find safe refuges in the Republic of Ireland, confident in the belief that the Irish courts will not extradite them, because the political defence is raised successfully again and again. For that reason there has been special legislation, under the Criminal Law Jurisdiction Act 1976, under which the terrorist Tuite was recently prosecuted to conviction in the Republic of Ireland and sentenced, but that was a wholly exceptional situation. Tuite was a defendant who was awaiting trail in the United Kingdom, escaped from custody, was then rearrested in the Republic of Ireland and tried by the Irish courts under that legislation on evidence provided by the United Kingdom law enforcement agencies.
The practical problem is that it is difficult in Ireland to get convictions because it is difficult to obtain the evidence necessary to produce those convictions. The Tuite case was somewhat exceptional. We did not have to rely on the Irish to get the evidence; we got it ourselves. In those circumstances, the evidence was adduced in an Irish court before three Irish judges, who convicted the defendant and then sentenced him. It was a wholly exceptional situation and cannot in any way be of comfort to those of us in Britain who wish to see strong steps taken by the Government to ensure that fugitives from justice do not escape.
There are plans afoot in the long term to reform the law, and the Home Office has recently produced a formidable document headed "The Review of the Law and Practice of Extradition in the United Kingdom". That excellent document was prepared by a working party appointed in March 1979. If I have any criticism of the document, it is that the case references are all at the back and that terrible abbreviations are used in the body of the document. Instead of the case being cited properly in the body of the


document, one has to turn to the last page but one to find the reference. Subject to that relatively minor criticism, it is an excellent document. It states the law succinctly and accurately and makes several sensible recommendations.
The recommendation which is of particular interest in regard to the Republic of Ireland is No. 22 on page 94, which says:
The new law should contain a wider politicial safeguard similar to that provided in the Fugitive Offenders Act 1967. This should not extend to offences connected with a political offence".
There is one other specific recommendation showing the absurdity of the Irish position. It is illustrated in the case of Bourke v. Attorney-General, reported in (1972) IR 36, and the extract from the headnote puts the point succinctly:
The Irish decision
—that is, in Bourke's case—
which offers some interpretation of the phrase `offence connected with a political offence' was in the case of Sean Bourke. Bourke helped George Blake, who was serving a term of 42 years' imprisonment for espionage, to escape from prison. His extradition was sought from the Republic of Ireland under the Backing of Warrants (Republic of Ireland) Act 1965. The application was rejected by the Supreme Court, with one dissenting voice, the court holding that Blake's offence in escaping was a political one and that Bourke's offence in helping him was an offence connected with a political offence in terms of the Republic's Extradition Act 1965, which follows the European Convention in this respect. The Chief Justice noted that the statute did not specify that the connected offence should itself have a political complexion".
That is simply one example of the operation of the rule which enables criminals—Blake was a criminal and not a political crusader—convicted by due process of law of a criminal offence, and sentenced to a long term of imprisonment, to escape justice by pleading a political defence which in all common sense and reality is totally invalid. We have to look at the reality of the position and not at the form in which things operate.
It has at last been recognised that something must be done, and must be done very quickly. Even the European Parliament, of which I am not a particular fan, has woken up to the problem, for on 10 July this year it voted for the abolition of the concept of political crime as a bar to extradition between members of the European Economic Community.
The document produced by the Home Office working party makes several recommendations about the amendment of the law of extradition in relation to European countries, but all that is no comfort to those of us in this House who wish to see terrorists, whether they be Irish terrorists, PLO terrorists or any other kind of terrorist, brought to justice, if necessary by extraditing them from abroad, trying them in our courts and sentencing them in our courts if convicted.
I should like to end my contribution to this short debate by asking the Minister to state the Government's intentions. I am sure that he recognises, as does the whole House, the gravity of the problem, which is particularly important in the context of the aftermath of the recent outrages. What are the Government's plans? It is true that the Government are in a difficult position, because extradition law, by its very nature, involves the consent of the Government of the country with which one is negotiating an extradition treaty.
There are many anomalies in the law, as the Minister will be the first to admit. It has always struck me as an

extraordinary anomaly that one can extradite for the substantive offence, but not for the offence of conspiracy. That seems to fly in the face of all common sense. Whether it is a crooked financier in California, a murderer in Malta, or a terrorist in Ireland, one can seek to extradite that individual on the substantive offence, but if a criminal conspiracy of any type is alleged extradition does not apply. That seems to be an extraordinary state of affairs and should be examined as soon as possible.
I do not want to take up any more time. The hour is late, both in the Session and in the day. This is a serious subject and one to which I know the Government have given anxious consideration for a long time.
Perhaps I can finally illustrate the issue in this manner. When questions were asked about extradition in the Republic of Ireland, the Secretary of State for Northern Ireland on 13 November 1981 told journalists at a Stormont Castle press conference
that he considered it `unreasonable' for the Dublin Government to refuse to extradite terrorists wanted in Northern Ireland. Pressed on the question he said: 'We feel very strongly extradition should take place. We do put pressure about it but such pressure can be counter-productive'.
The Government have recognised the problem. Even the former Secretary of State, the right hon. Member for Spelthorne (Mr. Atkins), said:
The Government's views on extradition are well known to the new Government in the Republic of Ireland. We consider that extradition can be the best way of bringing to justice fugitives south of the border for crimes they are alleged to have committed in Northern Ireland. In its absence, the extra-territorial legislation remains the best alternative.
It is all very well for the former Secretary of State to say that, but that depends on the evidence being available to prove the charges. The Government cannot shirk their responsibility and say that they will leave it to the prosecuting authority in the Republic of Ireland, because they very rarely get cogent evidence placed before the courts which would justify the court coming to a conviction in a particular case. That is a shirking of responsibility. Responsibility is ours and we must take it.
The former Secretary of State's reply continued:
As in the past, we expect the Government of the Republic to use this legislation, which permits prosecution in one jurisdiction for an offence committed in the other.
In answer to a supplementary question from the right hon. Member for Mansfield (Mr. Concannon), the right hon. Gentleman said:
I note what the right hon. Gentleman says. The new Government of the Republic are in the early days of office. Let us hope that the procedures agreed between us will prove to be the more effective than they sometimes seem to have been in the past."—[Official Report, 16 July 1981; Vol. 8, c. 1382–83.]
That was a somewhat pious hope without any real foundation.
Apart from the Tuite case recently, my researches have disclosed that there has been no other case in which that procedure has been followed. In all the other cases the criminals have got off scot-free. Although we have known who they were, when they have been brought before the Irish courts they have laughed at British justice and escaped all punishment.
It is against that background that I ask the Minister to tell the House what the Government's attitude is and what steps they contemplate taking to deal with this serious problem.

The Minister of State, Home Office (Mr. Patrick Mayhew): This is a timely debate, and I congratulate the hon. Member for Blyth (Mr. Ryman) on his success in bringing this subject to the attention of the House. It is timely today because of the terrible and disgusting attacks that we have recently experienced in central London and the continuing outrages in Northern Ireland. They remind us of the need to ensure that the perpetrators of such offences are brought to justice wherever they may be found. This is particularly necessary when the jurisdictions of two separate countries are geographically so close, communications are easy and there is a common travel area.
All those factors are true of the relationship between the United Kingdom and the Republic of Ireland and tend to make it easy for criminals to evade justice by fleeing from one jurisdiction to another. They ought also, however, to make it easier for the neighbouring States to co-operate in the apprehension and prosecution of fugitive criminals. Moreover, measures of co-operation are further eased between the United Kingdom and the Irish Republic by the common origin and similarity of our respective legal systems. Consequently, as the House is aware, the basic arrangements for the return of fugitive criminals between the United Kingdom and the Irish Republic are much simpler, and more comprehensive, than those which exist between the United Kingdom and other States.
Return from the United Kingdom is governed by the Backing of Warrants (Republic of Ireland) Act 1965, to which the hon. Gentleman has referred, and from the Republic of Ireland by the largely reciprocal provisions of its Extradition Act 1965. Those Acts provide for the return of persons accused or convicted of indictable offences or of offences punishable on summary conviction with six months' imprisonment, and for which there is a corresponding offence under the law of the requested State.
The procedure is that a warrant issued by a judicial authority in the requesting country is submitted to the police force in the requested country in whose area the fugitive is thought to be. If the necessary supporting evidence has been produced, the warrant is endorsed. The person sought may then be arrested and brought before a court whose function it is to consider whether to order his return. This simplified procedure omits certain important features of the Extradition Act 1870 and the Fugitive Offenders Act 1967—in particular, the need to establish a prima facie case against the accused person. The requirement for a warrant to be issued for the arrest of the fugitive, before the machinery for his return can be set in motion, means that the police must have satisfied a judicial authority that there is a case to justify the arrest of that person for the alleged offence.
The system is therefore based firmly on the respect which courts throughout the United Kingdom and the Republic rightly have for each other's decisions. It is an excellent arrangement, which is fully justified by the close ties of tradition, common interest and compatibility of law between the two States, and it greatly eases the task of both in securing the return of offenders where the evidence is available. The hon. Gentleman rightly emphasised that point.
As the hon. Gentleman has forcefully reminded us, however, there is a snag. Both the United Kingdom's and

the Republic of Ireland's legislation provide that a person shall not be returned for a political offence. In the Irish Extradition Act this restriction is further extended to apply to an offence connected with a political offence. In some cases involving terrorists, courts in the Republic of Ireland have held that the offence was a political offence, or connected with a political offence, and it has not therefore been possible for the Republic of Ireland authorities to return the offenders to the United Kingdom in accordance with their law. That is the problem on which we must focus. It may be helpful if I say something more about it and about the efforts that have been made to overcome it.
The principle of non-extradition for an offence of a political character, which is closely associated with the power to grant political asylum, is of long standing and is internationally recognised. It has been an essential feature of United Kingdom extradition arrangements since at least the middle of the last century, and was given statutory effect by our Extradition Act 1870. The inclusion in the Irish Extradition Act of an additional provision covering an offence connected with a political offence is not something that we have felt any need to imitate, but it is fair to say that it accords with the European convention on extradition. The Republic of Ireland is a party to that convention. The United Kingdom is not. However, the wider safeguard is included in our extradition treaties with Belgium and France. Of course, treaties almost always impose equal obligations on, and afford equal safeguards to, both parties.
There is no internationally agreed definition of what constitutes an offence of a political character, nor does our own or the Republic of Ireland's legislation define it. Moreover, our own courts have declined to bind themselves to any hard and fast definition, but they have made it clear that, in considering the safeguard contained in the Extradition Act 1870, the motives and purpose of the fugitive in committing the offence are highly relevant.
For some years now, there have been discussions between the Governments of the United Kingdom and the Republic of Ireland, as well as between like-minded States generally, on how to overcome the problems posed by terrorist criminals enjoying the benefit of the political safeguard. As to arrangements between the United Kingdom and the Republic, the problem was from our point of view one of the most significant of those discussed at the Sunningdale conference in 1973. As the House knows, it was agreed at that conference that a law enforcement commission should be appointed jointly by the Irish and the United Kingdom Governments to consider how persons committing crimes of violence, however motivated, in any part of Ireland could be brought to trial irrespective of the part of Ireland in which they were found. The commission considered different ways of approaching the problem, including the amendment of the extradition legislation. Regrettably, the members of the commission were divided in their views.
The Irish members adhered to the view previously taken by the Government of the Republic that it is a principle of international law that the extradition of a person accused of a political offence does not take place. They were also of the view that, because article 29.3 of the Irish constitution declares that Ireland accepts the generally recognised principles of international law as its rules of


conduct in its relations with other States, the law of the Republic of Ireland could not be amended so as to permit extradition for a political offence.
The United Kingdom members took a different view. They concluded that sovereign States may, where their mutual interests demand it, make or contemplate exceptions to the non-extradition rule. They also concluded that, while international law recognises a general practice of refusing extradition for political offences, there is no principle of international law forbidding it.
They further concluded that sovereign States, where it is in their mutual interests to do so, make exceptions to the general rule of non-extradition and that it is the practice of States to make such an exception where that is justified by the enormity or barbarism of the crime or the threat that it poses to international law and order. A number of international conventions concluded in recent years make such an exception.
Successive United Kingdom Governments have adopted the views of the United Kingdom members of the commission. However, successive Irish Governments have hitherto felt unable to change their position. Nevertheless, I know that my right hon. and learned Friend the Attorney-General is in touch with his opposite number in the Republic and that he hopes to resume discussions with him as soon as possible.
In the consciousness that agreement on extradition was not available, the joint law enforcement commission explored the contribution which an extension of extraterritorial jurisdiction could make to solving the problem of bringing to trial those accused of crimes of violence which might be regarded by the courts as being politically motivated. The commission recognised that the efficacy of such an arrangement would depend upon witnesses, both for the prosecution and defence, being ready to cross the border to the place of trial. Nevertheless, in the absence of agreement on extradition, it was agreed between the Irish and United Kingdom Governments that this course should be followed. The Criminal Jurisdiction Act 1975 and the Republic's Criminal Law (Jurisdiction) Act 1976 gave effect to the recommendation.
The scope of these Acts is wider in relation to co-operation between Northern Ireland and the Republic than in relation to Great Britain. So far as Great Britain is concerned, courts are limited to trying a United Kingdom citizen for an offence committed in the Republic only if it is an offence involving the use of explosives. The corresponding jurisdiction of the Republic is also limited to explosive offences, giving the Irish courts jurisdiction over such offences committed by Irish citizens anywhere. It is under the provisions of the Irish legislation that Gerard Tuite was tried and convicted at the Dublin special criminal court on 3 July for possessing explosives in Greenwich between June 1978 and March 1979, and it is of course a matter of satisfaction to the British Government that the extra-territorial arrangement should have proved effective in this case. However, I entirely accept the hon. Gentleman's point that the finding and provision of the evidence in that case rested with the British Government and that that was the primary reason for the successful conclusion of that prosecution.
I referred earlier to the fact that discussions on bringing terrorist criminals to justice have taken place not only

between the United Kingdom and Irish Governments but among Governments of European countries generally. Successive United Kingdom Governments have participated fully in these discussions, the most outstanding product of which, so far, is the European convention on the suppression of terrorism. The convention, drawn up under the auspices of the Council of Europe, is designed to ensure that the perpetration of acts of terrorism do not escape justice by a plea that these acts have political motives and that, if extradition cannot be granted, the requested State must consider prosecution. The passage by Parliament of the Suppression of Terrorism Act 1978 enabled the United Kingdom to ratify the convention.
The Republic of Ireland has felt unable to become a party to the convention. Its Government have explained the point about the Irish constitution to which I have referred. Nevertheless, in order to make arrangements for bringing offenders to trial as effective as possible throughout Western Europe, an agreement on the application of the convention on the suppression of terrorism was signed in Dublin by the then nine member States of the European Community in December 1979. This provides that if extradition is refused on the grounds that the offences are political offences, the requested State should submit the case to its prosecuting authorities for the purpose of prosecution. The agreement can, however, come into force only when it is ratified, and there is no immediate prospect that this can be achieved. The French, for example, have linked it with further progress on a proposed European Community convention on co-operation in criminal matters.
The Government, like their predecessors, are in no doubt about the repugnance which is felt by the overwhelming majority of British people at the notion that those who commit outrageous and indiscriminate acts of violence or barbarism such as those which we have recently witnessed should escape justice because their acts can be regarded, apparently, as political. I understand and endorse every word that the hon. Gentleman has uttered in condemnation of that result.
Whatever the merits of the political safeguard in a world-wide context, we believe that it should be possible for neighbouring States with close ties, common interests and full respect for each other's judicial systems to agree that advantage shall not be taken of it in matters so closely affecting them all. It is apparent that these sentiments are shared by the Governments and peoples of other European countries, especially those which have become parties to the European convention on the suppression of terrorism.
We remain of the view that extradition is the best way of dealing with fugitive offenders. It has been the position of successive United Kingdom Governments, in respect of terrorist criminals and in respect of all fugitive offenders, that it is proper and most effective for a person to be tried by the courts of the State within whose territory the offence has been committed. We have always been reluctant, although very ready to admit exceptions, to see any extension of extra-territorial jurisdiction. The reasons for this are well known and, as I have already mentioned, they were recognised by the joint United Kingdom-Irish law enforcement commission.
In essence, the common law tradition attaches an importance to oral witnesses and best evidence which makes it more difficult for us than for civil law countries to try or help to prosecute offenders outside their own country. In our discussions with the Government of the


Irish Republic, therefore, we shall continue to draw their attention to what we see as a continuing problem of great gravity. Nevertheless, in the absence of extradition arrangements which will deal satisfactorily with terrorist offenders, we attach great value to the legislation enacted in both countries to provide for the extra-territorial treatment of offences. Mounting prosecutions under the legislation is not without its difficulties, for the reasons that the hon. Gentleman has mentioned among others, but several prosecutions have successfully been brought in the Republic recently, which represent a step forward in making effective use of the legislation. The prosecuting authorities, both in Great Britain and Northern Ireland, will continue to ask the Irish prosecuting authorities to consider prosecution when they are satisfied that there is sufficient evidence to justify proceedings.
The hon. Gentleman rightly reminded us in fairness that the essence of extradition is that it derives from a treaty, and a treaty is merely the expression of an agreement. We can reform our own extradition law but that is merely the foundation for the agreement that is necessary to get a satisfactory arrangement established between Britain and another country. However, I was grateful to the hon. Gentleman for what he had to say about the report of the working party that was produced by my Department on 22 July. I am encouraged by the comments that he has made about it, coming from someone who takes so informed an interest in this difficult subject.
We intend to pay careful attention to the comments which we shall receive in substantial numbers. We have asked the hon. Gentleman and many others who take an interest in this subject to consider the document. In the light of the comments that we receive, we shall be better equipped to know how to move forward, perhaps along the lines of the recommendations contained in the report.
I wish that I could have told the hon. Gentleman that the problems that he has raised so lucidly and compellingly permit of some easy solution that has become clear to us, but I cannot do so. I hope, however, that the hon. Gentleman and the House will accept, as second best, my assurance that the Government and the prosecuting authorities are fully aware of the importance and the gravity of the problem with which this debate has been concerned, as well as of the difficulties, and that we shall continue to do all that we can to find the best and the most just solution to them.

Orders of the Day — Royal Assent

Mr. Deputy Speaker (Mr. Paul Dean): 1 have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:

1. Finance Act 1982
2. Appropriation Act 1982
3. Stock Transfer Act 1982
4. Derelict Land Act 1982
5. Local Government and Planning (Scotland) Act 1982
6. Woolworths (Aberdeen Development) Order Confirmation Act 1982
7. Commercial Banking Company of Sydney Limited (Merger) Act 1982
8. Derwent Valley Railway Act 1982
9. West Yorkshire (Parking and Transport) Act 1982
10. Greater London Council (Money) Act 1982

Question again proposed, That this House do now adjourn.—[Mr. Berry.]

Orders of the Day — Motor Vehicles (Imports)

Mr. Hal Miller: I hope that my hon. Friend the Minister will not think me churlish if I return to him on the motor trade after his generous—one might say sweeping—response to my earlier question about hire-purchase restrictions. I do not expect such a wholesale response today. The motor trade is grateful to him for what he has done so far and expects better things to come. My purpose in raising the subject springs from the announcement by my right hon. Friend the Secretary of State for Transport on 2 February in response to a question about the trade in so-called parallel imports of motor vehicles. These are imports from the Continent by individuals or non-accredited dealers.
My right hon. Friend's response demonstrated that there would be no change in the type approval regulations in Britain to restrict such trade until the type approval information was readily forthcoming to those who wished to take part in the trade. He said that discussions would be held with the industry to that end. My information is that it has not been possible for the Department and the trade to reach agreement on a code of practice to give effect to that aim. With the increase in the trade since his announcement, we might question whether it is still desirable to take those steps.
More recently, there has been much activity by DG IV, the directorate responsible for competition policy in the European Economic Commission. That directorate has subjected Continental motor manufacturers—people are often only too ready to decry our manufacturers—to the threat of action to remove the limitations on the supply of right-hand drive vehicles to Continental dealers even before the case has been decided. I must warn my hon. Friend that any such action would bring the EEC into further disrepute in Britain. I hope to demonstrate that a common market is not operating because of the difficulties in tax structures and licensing provisions.
I am conscious of the fact that in raising the subject and in taking the line that I intend to take I am taking on the wisdom of the Establishment, and no doubt I shall receive an unsatisfactory press. The Economist carried a headline "Carry on importing". The article stated:
The British Government has, bravely, tried to encourage the trade".
The Scotsman suggests:
The British car buyer: taken for a ride?
The Times opines that life is "too comfortable for cars." The Sunday Times sent the redoubtable Mr. Barrie Penrose to investigate the trade, which—this is near to the Minister's heart—issued 40,000 kits to would-be do-it-yourself importers.
We must examine carefully the facts and figures behind the trade and why I, a humble Back Bencher, should take on the might of the Establishment in this way. It is difficult to establish the exact size of the trade at present. The best estimate that I have been able to arrive at is about 50,000 units a year. That is about 3 per cent. of the British new car market. Coincidentally, it corresponds to the drop in forecasters' estimates of demand in the United Kingdom market this year, from 1Ċ5 million to 1Ċ45 million. However, much higher figures are being quoted in some quarters.
I am interested to see the hon. Member for Antrim, South (Mr. Molyneaux) here today, because of the rapid

developments in the Ulster markets of imports across the land frontier from Eire, where the vehicles are not subject to the construction and use regulations. Therefore, there is no certainty that they comply with the safety requirements.
The right hon. Member for Down, South (Mr. Powell) raised the matter in the House a fortnight ago, but I do not think that he mentioned the scale of such imports. One quarter of new registrations in Ulster consist of uncertificated vehicles. That proportion is rising and the effects on the motor trade in the Province can well be imagined. I shall come later to the general effects on the motor trade throughout the United Kingdom.
What are the reasons for the sizeable trade? Let us admit at once that there is still a considerable disparity in price between cars available on the Continent and in Britain. I shall seek to go into the reasons for that. I would just issue a cautionary note, that the figures widely quoted in the press often give a discounted price that is available on the Continent but a list price for Britain, taking no account of the discount available here. Discounting is widely practised because of the oversupply of the British market. Indeed, it is estimated that 1Ċ5 million new units are sold, compared to a rate of supply of 2 million units. Therefore, considerable discounts are available.
None the less, if we take the example of a Volkswagen Golf or an Audi, the manufacturers tell me that there is a disparity of about £800. If one takes a more popular model, perhaps a 1600 four-door Cortina, the price would range from £4,300 in Britain, to £2,500 in Denmark, to £2,900 in Belgium. I should make it plain that those are the pre-tax prices—the manufacturer's price and the dealer's margin. I say "pre-tax" because here is one of the reasons why there is no common market. The tax on a 1600 four-door Cortina in Belgium is 200 per cent. That is twice the combined manufacturer's price and dealer's margin. That is one reason why the manufacturer's price in Denmark and the dealer's margin have both been depressed below profitable levels.
Another reason—apart from the Danish tax system—is that Denmark is not a manufacturing base for motor vehicles and all manufacturers use it as a marginal market. Car manufacture is a volume business, and if additional units can be sold on the basis of variable costs, taking no account of fixed costs, a contribution to profit can still be achieved. A high rate of tax also appertains in Eire and that has given an impetus to the trade into Ulster.
I deal next with Belgium. I have already mentioned the figure for the Cortina. It is low, because there is price control in Belgium to protect Belgium's devaluation. That is another significant factor. Despite the European monetary system, there have been recent devaluations in both France and Belgium, which have been protected by price controls. I shall return to that later in the context of the European Commission's attempts to ensure that prices between markets do not vary by more than 12 per cent. If they do, the Commission will not allow the distribution to continue.
The devaluations of 12 per cent. and the imposition of price controls in both Belgium and France mean that a price cut below a profitable level is being forced on manufacturers—not only British manufacturers—if the Commission insists on freedom of trade being based on French and Belgian prices.
There is a differential in manufacturing efficiency between many United Kingdom manufacturers and their


Continental counterparts. The differential in manufacturing cost for a small to medium-sized family saloon works out at about £350. I doubt whether anyone would go to the Continent, pay the deposit in advance and go through all the bureaucracy to import a car for such a low saving. Nevertheless, that differential in manufacturing efficiency exists. Of course, our manufacturers are trying to reduce that differential and to bring our performance up to Continental levels. There has been great success with the Austin Metro, which already exceeds Continental levels.
The Metro is more efficiently produced than other British-made cars, but it has to be sold in Belgium at a lower price than in the United Kingdom because of devaluation and price controls. That is one important reason for the differential, which has apparently not been understood by The Economist, the Financial Times or any of the other pundits that I have cited. It is not a difficult concept to grasp.
We must bear in mind that there are not only manufacturing differentials, but differentials in the economies of the various member States. An index of competitiveness that is based on exchange and inflation rates shows that since 1977 all British manufacturers—not only car manufacturers—have been put at a competitive disadvantage during the past five years in relation to France and Germany. Germany is one and a half times more competitive than Britain, and Belgium is almost twice as competitive as Britain.
That has nothing to do with manufacturing efficiency, but everything to do with the movement in the exchange and inflation rates. I have excluded from the index the effect of interest rates. Therefore, despite what some of the financial pundits may say, it is not only our manufacturers that are to blame.
There are differences between member States of the Community. I have talked about manufacturing efficiency and the indexation of competitiveness with exchange and inflation rates. I have mentioned price controls, excise duties and devaluation, and there are also marketing differences. Manufacturers launch their new models into different national markets at different times, and obtain price increases in different markets at different times. I have pointed to the disparity in the Volkswagen Golf. A year ago that disparity was £1,800, because in Germany the manufacturers had not been able to obtain a price increase because of unrestricted Japanese competition. They put through three price increases this year after some understandings had been reached with the Japanese which reduced the differential, but then there were exchange rate problems.
There are still national as opposed to Community markets. How important is the question that I should seek to raise it again? I have attempted to show the size of the trade. What will be the effect of that trade on our manufacturers and traders? The motor trade is going through a depressed time. For example, 13 per cent. of all bankruptcies in the first six months of the year were in the motor trade. Apart from having to discount on new models, the motor trade has an obligation to keep spare parts, to provide services and to carry out warranty work on those so-called parallel imports, without having had the benefit of the original sale. The result of an unchecked growth in that trade would inevitably put several more of our dealers out of business.
It is not often appreciated that motor dealers employ over 400,000 people which is as many as are employed by

motor manufacturers. They have a heavy investment in servicing, warranties and spare parts. They fear that if the trade is allowed to continue, fleet buyers will be tempted to participate. Fleet buying accounts for 70 per cent. of all new car sales.
There are arguments—although I do not wish to overstress them—about the safety of parallel imports, apart from the ones that are uncertificated in Ulster. There are dangers in converting left-hand drive to right-hand drive unless it is carried out in a proper manner with the appropriate parts. The bulk of the parallel trade is in factory-built models, and that is what I am discussing.
The trade does not affect only dealers near ports. Representations have been received from Mr. Rollings of North-East Motors, who fears that if the EEC Commission continues in that way there may be a forced withdrawal of certain marques from the market altogether in the same way as Red Label whisky has had to be withdrawn from the United Kingdom market, resulting in a restriction of the consumer's choice rather than an extension of it. I am sure that that would be of concern to the Minister.
Manufacturers would be seriously affected if the trade grew too much or if the Commission were allowed to impose uniform prices across the Community. That would inevitably result in a decrease in manufacture and assembly in this country, with further consequences for employment, particularly among the component makers.
The manufacturers realise and accept their responsibility to become as competitive in this country as in Europe, and great strides have been made by the Austin Metro. Enormous progress has also been made by Vauxhall at Luton, where the assembly of the Cavalier is nearly as efficient as the assembly in Germany and by the end of the year will be even more efficient. Good progress is also being made by Talbot at Ryton near Coventry.
Our manufacturers are not complacent or hanging on desperately to a cosy, protected and profitable market. The whole European market is not profitable because of overcapacity and the incursion of cheap imports from Japan, Korea, Spain, Australia and South Africa—all markets to which our manufacturers have no access. In addition, we should not forget the politically priced vehicles from Eastern Europe.
Manufacturers and traders are worried and I ask the Minister to think carefully before he and the Secretary of State for Transport go ahead with the proposals that they announced on 2 February. There is no common market while there is no fiscal harmony and no harmony in exchange rates or price structures.
A political dimension threatens further the acceptability of our membership of the EEC. It is noteworthy that we have not yet achieved a common type approval system for motor vehicles throughout the EEC. Some member States make no provision for personal imports through the parallel trade. They are not possible without individual inspection of vehicles and the consequent expense and delay.
I ask the Minister to hasten slowly on the proposed changes and strongly to resist attempts being made by DG IV of the Commission to impose findings without the matter having been brought to trial.

The Minister for Consumer Affairs (Dr. Gerard Vaughan): I wish straight away to congratulate my hon. Friend the Member for Bromsgrove and Redditch (Mr.
Miller) on securing this debate on a highly topical subject of great interest to British car buyers and of great importance to the British car industry generally. As he said, it is a complicated subject, but he explained it very clearly and his expert knowledge in these matters is greatly appreciated by all of us, as is the way in which he supports the car industry in this country—quite apart from the fact that he is chairman of the all-party motor industry group in the House.
I listened with interest to what my hon. Friend said. I also read with great interest the various articles that he publishes on this from time to time. I was, for example, extremely interested to see an article only last Tuesday, 27 July, in the Birmingham Post, in which my hon. Friend pointed out the needs and problems of the motor industry. This is very much appreciated.
Hon. Members will already be familiar with the controversy about parallel imports of cars from other parts of the EEC. I was glad that in this context my hon. Friend mentioned the recent lifting of hire purchase controls, which is highly relevant to the car industry. I was also glad that last Monday I was able to give him such an important answer on this subject. We hope that by lifting the hire purchase controls we have taken a further modest step to improve not only general trade but the British car industry in particular.
I know that my hon. Friend appreciates that the controversy and concern about parallel imports follow speculation that the Government might restrict the exemption that personal car imports enjoy from type approval regulations. We all appreciate the importance of those regulations, as they ensure the safety standards of cars coming into the British market.
I should say at once that we have no intention at all of restricting the exemption. It is possible, of course, to buy the same car at different prices in different parts of Europe. We take the firm view, however, that it is of benefit for us to have open competition. It is of benefit to the customers and also to the car industry. Wherever possible, we take the view that it is for the industry itself to manage its trading activities as efficiently and effectively as possible. I agree with my hon. Friend. We do not take the view that the car industry is in any way complacent about the situation, and it is making changes that it believes to be of benefit to customers generally. The statement made on 2 February by my right hon. Friend the Secretary of State for Transport made it clear that unless there were arrangements to ensure that type approval information was readily available to individuals and to independent dealers there would be no question of changing the present personal import arrangements. Therefore, on two fronts we are really saying the same thing.
It is well known that over the past few years substantial differences in car prices have arisen between the United Kingdom and the rest of the Community. This country is not alone in experiencing such problems. There are also difficulties, for example, between Denmark and Germany. The main cause has been the greater strength of sterling, although it is not the only cause. Higher production costs in this country are also an important factor. There are also the other aspects to which my hon. Friend has referred.
Price differences between the United Kingdom and the Continent have created great interest in personal car imports from other EEC countries. This in turn has been

associated with a growth in complaints that manufacturers are seeking to obstruct imports outside the normal dealer network. I do not wish to give a view on individual cases, although we can investigate them if and when that is necessary. Anti-competitive practices, as defined in the Competition Act, are, in the first instance, for the Director General of Fair Trading to consider.
Most recent complaints have involved transnational trade and represent possible breaches of the competition rules of the European Community. These rules are administered by the European Commission which has, I understand, received a number of complaints alleging attempts by manufacturers, United Kingdom and non-United Kingdom, to restrict the parallel import of cars. My hon. Friend referred to allegations that it had not been possible to buy cars with the driving position on the correct side. We regard a strong, open European competition policy as an essential part of free trading provisions of the Common Market. We see this as a benefit in the long run to customers.
Although the Commission administers the competition rules, we are free to express our own opinion on individual cases without prejudice to such views as we might wish to express on particular cases coming before the advisory committee or the European Court. I assure my hon. Friend that I would not subscribe to the view that price differentials on cars are due solely to attempts by manufacturers to maintain market segmentation.
My hon. Friend referred briefly to the Commission's draft. I would emphasise that, at this stage, it is only a draft block exemption on motor vehicle distributor networks. The proposal is still at an early stage of discussion. There will be opportunities for those concerned to give their views before a definitive instrument is produced. We shall take all options into account, including those of the industry, before we come to any conclusions. I assure my hon. Friend that these are early days and that there is plenty of opportunity for views to be considered and dealt with.

Mr. James Molyneaux: Will the Minister take into account what his hon. Friend said about the impact already of imports on the United Kingdom market? Will he study especially the figures that his hon. Friend gave relating to Northern Ireland which show that 25 per cent. of new registrations are composed of vehicles imported across the land frontier of the United Kingdom? Although the Minister says that these are early days and that there is still time available, will he accept the warning that this situation will escalate in Northern Ireland and in Great Britain unless speedy action is taken?

Dr. Vaughan: I am glad that the hon. Gentleman has raised that matter. I listened carefully to the remarks of my hon. Friend. My hon. Friend also mentioned that type approval does not apply in Northern Ireland. This is a matter for the Northern Ireland Office. As my hon. Friend the Under-Secretary of State for Northern Ireland announced on 27 May, it is intended to introduce a type approval system in Northern Ireland as soon as possible. I mention that now as the hon. Gentleman has mentioned the Northern Ireland market.
I am conscious of the industry's view that any sudden reduction in price disparities would have a harmful effect on the profitability of car manufacture in this country. I shall strive to ensure that the Commission is made well


aware of this. I feel, however, that these fears may be exaggerated, given the Commission's time scale on block exemption. I am sure my hon. Friend agrees that the interests of United Kingdom manufacturers, as much as United Kingdom consumers, lie in the establishment of genuine free competition throughout the Community. I have referred to this a number of times. It is important. This is an important subject for the United Kingdom car market. We are well aware of the problems. I congratulate my hon. Friend on having brought the matter before the House.

Orders of the Day — Pensioners (Heating Costs)

1 pm

Mr. A. W. Stallard: During the past year, the problems of pensioners' heating costs have been raised several times. Early-day motion 656 is the latest in a series of motions on the subject. In the short time that it has been before the House, it has attracted 50 signatures from right hon. and hon. Members on both sides. During the Supply day debate on 25 January, the Opposition urged the Government to bring forward proposals for immediate assistance with heating costs.. My own contribution, the Fuel Standing Charges (Exemption For Pensioners) Bill, which received the support of all national pensioners' organisations, is still blocked by the Government. In addition, motions on fuel disconnection and repayment policies as well as gas price increases have been on the Order Paper. However, we are still no neareer anything resembling a comprehensive fuel plicy to assist pensioners to deal with the high costs of heating.
All of us who support the urgent need for such a policy are anxious that something should be done before pensioners have to face the coming winter. We have quoted at length the cases of hypothermia that arise every year. We also know that the number of deaths generally rises in the winter. Although many deaths are brought on by the cold, the statistics mention them not as cases of hypotheria but as deaths from chest infections and heart disease. Thus, the problem of hypothermia is much more serious than we have been led to believe.
We also know, as the Electricity Consumer Council report showed last year, that on average pensioners spend less on heating their rooms in winter than families do in summer. Over 40 per cent. of pensioners cannot even heat their bedrooms. The problem is mostly caused by the high cost of heating. From April 1980 to the present, the rate of increase in gas prices was nearly double that of the rate of increase of pensions. That fact was confirmed in a reply to my hon. Friend the Member for Aberdeen, North (Mr. Robert Hughes). Sir Dennis Rooke, chairman of British Gas, said:
I accept that gas prices have risen more rapidly than the rate of pension increases since April 1980.
In the last six years, the increase in the fuel and light component of the price index, which includes all domestic fuels has far outstripped both the general price index and the increase in pensions. Many pensioners take great care over their fuel consumption and, in our opinion, make too many economies, sometimes with drastic results. Many keep their fuel consumption to a minimum and then they find that they have to pay much more in standing charges than for the fuel that they consume. Therefore, the price per unit or per therm for pensioners far exceeds that paid by the rest of us.
Hon. Members on both sides of the House have produced many examples of hardships caused by that predicament, so I shall not weary the House by giving the scores of examples that I have received since I introduced my Bill on 12 May. However, I shall quote the latest, which I received only yesterday.
A bill issued in June to one of my constituents shows that only eight units of electricity were used. This man tells me that in the winter, because of his strong objections to the standing charges and the resultant high price of the fuel that he consumes, he burns paraffin and uses candles. I


imagine that now and again he has to switch on the light to see where the candles are. Those eight units of electricity consumed were shown on the bill as costing 43p. That was his total consumption but the standing charges and repayment charges amounted to £7·79—18 times the cost of the fuel consumed. Pensioners do not understand that; nor do the rest of us. It is ridiculous that that should be allowed to continue. I could quote many other examples, some of them worse and some of them not so bad. However, time limits me to this one.
We have been joined in our campaign in recent months by four gas consumers' councils, and I wish to make brief quotations from each of their annual reports.
The Scottish Gas Consumers' Council says in its annual report:
In March 1981 the quarterly standing charge was £6. It is now £9. We feel strongly that the standing charge should not be increased further. Scotland in particular was hit by Arctic conditions in January which sent gas bills rocketing for all our consumers and caused special hardship to pensioners, who could hardly have foreseen unexpectedly large bills dropping through their letterboxes in the spring. At the other end of the scale we have customers who have tried very hard to economise in their use of gas and are dismayed to find when the bill comes that the standing charge is more than the charge for gas.
The North-Eastern Gas Consumers' Council said:
The Council was extremely critical of the increase called for in quarterly standing charges which, when the April and October increases are implemented, will mean that since 1976 these quarterly charges will have risen from £1 to £9Ċ20 per quarter. A break-down of the costs was provided by British Gas but Council were not satisfied with it. They rejected totally the proposed rises and requested the National Gas Consumers' Council to challenge them.
The North-West Gas Consumers' Council said:
The Council is particularly concerned at the rate of increase of the quarterly standing charge. At the time of the announcement of the Government's current pricing policy, the charge was £1Ċ62. By October 1982, it will be £9Ċ20, a massive increase. Whilst the Council recognises the argument for each consumer bearing a reasonable share of the cost he incurs, it is alarmed at this rate of increase. It is particularly hard on the lower paid members of society to have to meet increases of this size in charges over which it is not possible for the individual consumer to exercise economy.
The South-Eastern Gas Consumers' Council called for a review of the "philosophy and general policy" in the matter of standing charges.
So these powerful bodies support the argument for a review and a serious look at fuel costs.
It is only fair to say that the Government have one supporter. The North Thames Gas Board said:
During the year considerable concern has been expressed over the frequently increasing standing charge—£8Ċ00 per quarter from 1st October 1981. Many organisations and individual consumers have expressed a desire to see the charge withdrawn, particularly for certain groups of customers. Whilst we sympathise with those less able to pay we believe this remains a problem for the social services and not British Gas.
It goes on to imply that the standing charge will have to be increased still further if the board is to meet its commitments.
We await with interest the deliberations that we have been awaiting for many months of the Department of Energy and the Department of Health and Social Security which are looking into this problem.
I expect that the Minister will say, first, that people can economise by using slot meters. This has been said before. But I remind the hon. Gentleman that there is now a standing charge on slot meters as well. One or two of the

consumers' councils said that they were equally perturbed that these standing charges for slot meters would have risen, by October, by 83 per cent. since 1981. They were introduced only a little more than 12 months ago and already they have increased from £1Ċ80 to £3Ċ30. That needs a bit of explaining to ordinary folk who are suddenly getting these big bills.
It may be that the Minister will say that these people can be or are being helped through the social security system single payment benefits. Despite the great claim that the Government made in January about this provision, it was summed up by Age Concern when it said:
It is nothing new for far too few.
As I understand it, although the guidance was given to local DHSS offices and it was said that £255 million was to be spent on this scheme, only £65 million of it was new money, and of that only £21 million went to the over-70s. It did not apply to those pensioners under 70 who were on rent and rate rebates, so it was of very limited application and of very limited help, if it helped any at all. Age Concern was absolutely right when it said that it was
nothing new for far too few".
It is known that many other people will probably lose entitlement even to that small claim when the switch to the unified housing benefit becomes operative. The new scheme should be extended immediately to all recipients of rebates and housing benefit.
Members of Parliament, as well as Age Concern, have urged the Government to devise in consultation with interested organisations, a comprehensive fuel strategy, which will take account of the needs of the elderly and other low income consumers, and look at pricing, efficiency, insulation and regional problems.
Two weeks ago the Minister, in reply to a letter from Age Concern, made it clear that the Government had no intention of devising a new policy. I gather from the tone of his reply that it is obvious that the Government's fuel policy is being determined by short-term Treasury dogma rather than by any other considerations. For example, on the issue of assistance with heating costs, the Minister said:
Much as we would like to extend it, I am afraid that in present economic circumstances the resources are simply not available to finance the kind of schemes which you appear to have in mind".
He did not, of course, mention the colossal profits recently made by the various corporations, nor did he mention the effects of the Gas Levy Bill introduced recently by his Government, and the attempts being made by the telephone authorities to assist some consumers. He could have mentioned all of them in a far more constructive way, but he did not.
I also had the impression from his reply that the Minister appears to be satisfied with current attempts to improve energy efficiency in buildings through insulation measures. Many of us are far from satisfied. In its letter to the Minister, Age Concern asked for improvements in the standard and extent of domestic insulation and energy conservation. Its case was supported by the recent report of the Select Committee on Energy, dealing with energy conservation in buildings, which recommended
a programme to insulate fully the houses of those in receipt of fuel allowances, currently costing the nation £240 million per year".
The Select Committee laid the blame fairly and squarely at the Minister's door. It complained of the lack of political


will at the heart of Government which smothers the efforts of the Department of Energy's conservation division—a very serious charge, and one which should be answered.
All that I have said so far surely shows that there is an urgent need for a comprehensive fuel policy, not based on short-sighted Treasury policy. The all-party group for pensioners knows well that it is only through Government initiative that there can be any hope for pensioners. It is clear to us from a recent meeting with British Gas that the corporation's hands will remain tied until the Government take a new look at the problem.
In addition to the major reforms in pricing, social assistance and insulation that we want to see, we believe that the Government should stimulate simple measures in the interim to assist pensioners. I believe that the National Federation of Old Age Pensioners' Associations has recently suggested that in some areas the Economy 7 tariff, which operates within the time band 1 am to 9 am, could be better used to the advantage of pensioners and others. The federation has suggested that adjustments could be made to that time band that would make a tremendous difference to some people. I suggest that such constructive proposals and suggestions should be treated seriously. I hope that the Minister, together with the electricity boards, the pensioners' organisations and the charities, will examine the matter, and find an arrangement that will better suit the needs of pensioners and others in similar circumstances.
Pensioners do not want to hear from the Minister pious words, expressions of sympathy or promises of help at some future unspecified date when and if the economic position changes, because too many by then will have died from cold. Pensioners want action now. Now is the time, during the summer. If we cannot solve the problem in summer when the weather is reasonable, there is hardly any point in solving it when the problem is at its worst. We need action now to reduce the tremendously high heating bills, to remove the fears and the worries of the people affected, and to relieve them from the savage winters and years and years of fuel poverty.
Before the House adjourns for the Summer Recess, the Minister must tell us what he proposes to do before the next winter is upon us.

The Under-Secretary of State for Energy (Mr. David Mellor): In responding to the hon. Member for St. Pancras, North (Mr. Stallard), may I first acknowledge the genuine and consistent interest that he has taken in this subject? I welcome his interest and that of other hon. Members on both sides of the House in recent months. The impact of fuel bills on poor consumers is a serious issue. It is one to which I have been paying considerable attention since I came to the Department of Energy last year and, before that, in representing a London constituency, as does the hon. Gentleman. I faced problems at my advice centres which were not much different from those which confront him It is a subject which, I can assure the hon. Gentleman, my colleagues at the Department of Energy, and certainly my colleagues at the Department of Health and Social Security, have in mind.
We took a genuine interest in trying to deal with the problems of disconnections earlier this year, with satisfactory results, which were achieved only by paying attention to the industries, to the consumer councils and to the various groups which represent some of the

consumers who were worst affected, and we were able to go forward on that basis. I hope that the hon. Gentleman was not suggesting that there was anything of a sham in the present investigation or that any of the groups which have supplied him with information do not have the opportunity to put their case to us in the knowledge that the points they make will be seriously considered.
I can assure the hon. Gentleman that he will not hear any pious words from me today. I hope to paint in some of the difficulties that lie in the way of making some of the changes that he suggests. Those difficulties existed while the Labour Government were in office. Since he was able to curb his frustration about the presence of the standing charge at that time, he should realise that, when the review went forward in 1976, problems stood in the way. Although I can deliver today only an interim report on what has happened, I must tell the House that problems of some magnitude face the Government. The magnitude of those problems should be recognised by Opposition Members.
I should like to make a few general comments on energy prices. We have had two substantial debates on domestic fuel prices this year and I shall not attempt to recover all the points made in them. It is important in a discussion of this problem to have a clear perspective. When the Government came to ofice, we deliberately set out to re-establish realism in energy pricing. We made it clear that prices needed to be sensibly related to costs and the market. Artificial price restraint, related not to the industry's efficiency but simply to subsidy and cross-subsidy, paid for by the taxpayer, could not continue.
These increases affected all parts of the community and have now virtually fed through. In the case of gas, this year' increase is the last of the three-year programme. It will leave gas cheaper in real terms than it was in 1970.
One particularly relevant statistic is that, over the last 14 years, the proportion of a married couple's old age pension needed for enough gas for a cooker and a gas fire has more than halved. If one goes back further, the price of gas has on average risen at about one third less than the rate of inflation over the last 20 years.
It is also important to recognise that this has made possible the holding of industrial gas price rises to around 3 per cent. for both 1981 and 1982, a move that has been widely appreciated throughout industry at an especially difficult time. We could not perpetuate the situation that we found when we took office, when gas to industry was 25 per cent. more costly than gas to the home, even though supplying gas to industry was cheaper.
The last two annual increases in electricity charges have both been held below the rate of inflation, and in addition a rebate averaging about was given on bills in the first quarter of this year.
The price of domestic coal has also increased by less than the rate of inflation for each of the last two years. In comparison, the Government have kept their pledge to maintain the real value of the pension against general inflation.
I should now like to look in more detail at the problems faced by pensioners and other poor consumers. As the hon. Gentleman said, hon. Members have voiced considerable concern about the difficulties faced by pensioner; in particular in paying their fuel bills. I entirely understand, respect and share that concern.
A number of suggestions have also been made, not only today, about possible ways of assisting pensioners with


their fuel bills. The hon. Gentleman reminded us of his proposal for the simple abolition of standing charges for pensioners, a subsidy aimed at cutting their overall bills by a given proportion and alternative tariff structures with higher unit charges and no standing charge.
I am not in a position today to give a definite answer to any of the proposals. One of the major purposes of the review that I and my hon. Friend the Under-Secretary of State for Health and Social Security have been conducting has been an investigation in depth of the possibilities of such proposals. However, a number of very difficult questions must be answered—they cannot simply be dismissed as pious words—before schemes such as these could be endorsed as sensible alternatives or additions to the current structure of tariffs and financial assistance.
The most crucial question is probably "Does it provide worthwhile help to those most in need in the most cost-effective manner?" Let me illustrate the problem by referring to the hon. Gentleman's own suggestion of abolishing the standing charge for pensioner households. At first sight, the idea may appear simple and attractive to eliminate an aspect of bills that we all know causes widespread misunderstandings and annoyance.
In the first place, the Government do not fix standing charges. That is entirely a matter for the industry, and it is for it alone to decide the level of standing charges. Secondly, such charges are not an arbitrary tax designed to raise unnecessary revenue from captive consumers. They are intended by the industries to reflect the real costs incurred in keeping supplies constantly available to consumers. It can be argued that these costs are different from the cost of generating or supplying the gas or electricity used by the consumer, which falls under the unit charge. Certain costs, it is said, exist regardless of the amount of energy consumed and are involved in installing and maintaining the system of supply.
In the light of what the hon. Gentleman said about the consumer councils, I should make it clear that the principle of the distinction between the standing charge and the unit charge has been fully endorsed, not only by independent studies such as those carried out by the Price Commission established by the Labour Government in 1979, but also by the national electricity and gas consumer councils. In my meetings with the councils during the review, I have been told that they believe there is validity in the distinction in principle between the standing charge and the unit charge.
The hon. Gentleman mentioned the observation of one regional consumer council about the increase in gas standing charges. Before 1979 there was a three-tier tariff with an additional charge for the first 52 therms of gas supplied, which bit especially heavily on poor consumers who were also small consumers. They paid a disproportionately high amount for their gas. That tariff was abolished. Had the two-tier tariff that we have been in force in 1979, the standing charge would in reality have been not the figure that the hon. Gentleman quoted of just over £1 a quarter but over £6 a quarter.
There are two distinct issues. It is one thing to decide whether the distinction between standing charges and the unit charge is in principle a proper one on which to base the tariff system. It is quite another thing to be sure that the actual costs imposed in the standing charge reflect the optimum efficiency of operation of the industry imposing

the charge and thus can be considered as being fairer for consumers. That is distinct from the question whether there should be a distinction drawn in principle between a standing charge and a unit charge.
We are dealing with large sums in considering the various proposals for relief that have been put forward. As the money would have to come from the pockets of taxpayers, many of whom are not well enough off to take increases in their taxation at this moment, I must stress that to abolish the pensioner household standing charge would cost about £300 million in revenue. The taxpayer cannot be expected to make that up. The cost would not go away immediately, and perhaps it would never go away. The only way in which the industry could make up the shortfall would be by increasing the unit charge, which would pose difficulties.
I have shown sympathy to pensioners who have come to my advice centre to show me a bill on which the standing charge is larger than the charge for the number of units consumed. Our research shows that in only 13 per cent. of poor pensioner households is the standing charge higher than the units charged. A number of poor consumers, through no fault of their own, are also large consumers. To move from the standing charge to the unit charge would merely transfer the difficulties of one poorer-off section of the community to another section. That is why some of the groups that represent poorly-off sectors in the community have not shown great enthusiasm for abolishing the standing charge as an end in itself. They recognise that for some large consumers such a move would pose problems.
These difficulties are not new. I do not want to be partisan but I do not want the hon. Gentleman to make his criticism of the Government more bitter by making a few partisan observations about whether this Government, above and beyond any previous Government, are concerned to alleviate the problem if they were able to do so. The previous Labour Government carried out their own thorough study of alternative tariff regimes, which was designed to help all consumers, and published the results in a document on energy tariff reform in 1976. They met great difficulties, as we have, in finding a way of using tariff adjustments as a mechanism for helping poor consumers that did not carry severe penalties for others in great need.
General tariff adjustments, concessionary tariffs and free fuel allowances were all examined in depth by the previous Labour Government. It was none other than the right hon. Member for Bristol, South-East (Mr. Benn) who summed up the Government's conclusions on introducing the study document by saying:
The Government had concluded that none of these possibilites offer a satisfactory way of helping poor consumers with their fuel bills.
Although we have not yet drawn conclusions from our study, I must point out that if standing charges for domestic consumers were simply abolished and we were to recover all the revenue through the unit rate, small bills could be reduced by up to a maximum of about 65p a week. But the effect on those consumers who already face large bills could be extremely serious. Those who, through no fault of their own, are heavily reliant on electricity could face bills increased by about £2 per week.
I am sure that I need not remind the hon. Gentleman that our direct assistance to poor consumers is the highest ever. More than £250 million is to be paid out in heating


additions this year and about 1½ million pensioners will benefit by between £1Ċ65 and £4 a week. In the year from November the total will increase to more than £300 million. That increase protects its value against a rise in fuel prices. It shows that the Government are not complacent about the plight of poor consumers. Our assistance is not the token relief that was offered by the previous Government in their electricity discount scheme. It is a considerable addition to helping the poor to pay their fuel bills, which we recognise are an imposition.
As the hon. Gentleman will appreciate, this must be an interim report on standing charges. We shall undoubtedly return to the matter in the autumn and, although I could not accept all of the hon. Gentleman's points today, he raised some interesting matters that I shall examine and bear in mind in bringing the review to a conclusion.

Orders of the Day — Victoria Hospital, Romford

Mr. Michael Neubert: The history of the matter that I raise today is a sorry story. As one would expect from a hospital called "Victoria", it was opened nearly 100 years ago in celebration of Queen Victoria's golden jubilee on land donated by a public benefactor, William Mashiter. The hospital was funded by public appeal in the tradition of public spirit and generosity that can be seen today in the money that has been raised and the enthusiasm generated for this hospital under threat.
The hospital was further extended as a memorial to King Edward VII in 1912, and in 1939 the foundation stone of a three-storey building was laid by Lady Neave. Throughout years of service to the community, the hospital has gained nothing but praise, yet it is now proposed to close the hospital as a surgical unit and to transfer the acute in-patient services elsewhere. Most people find that astonishing. The people of Romford provided the hospital by public subscription. They regard it as "their" hospital and, having seen it taken over by the National Health Service in 1948, they now see the work it does threatened with closing.
As their Member of Parliament, I welcome the opportunity of this Adjournment debate on the last day before the Summer Recess to express their outrage and disbelief at the proposals. It is the second time that I have raised the matter on the Floor of the House. I do so because of its importance to Romford. The first occasion was on 23 May 1979, when I took the earliest possible chance of seeking Government support for the retention of the hospital. My hon. Friend the Under-Secretary of State may remember that he was present then but in a different capacity.
The then Minister for Health, now my hon. Friend the Minister for Consumer Affairs, responded to the debate by assuring the House that there was
a continuing place for the small local hospital where there is a useful and satisfactory role for it."—[Official Report, 23 May 1979; Vol. 967, c. 1193.]
There can be no doubt about the Government's commitment to small hospitals. Within a fortnight of her historic election as Prime Minister, my right hon. Friend said in the debate on the Address on 15 May 1979:
I have great sympathy with the cause of small local hospitals."—[Official Report, 15 May 1979; Vol. 967, c. 81.]
On 24 May 1979, in answer to a question from me about the Victoria hospital, 91 years to the day since it was opened by Mr. J. Theobald, MP, who I presume must have been one of my predecessors, the Prime Minister said:
we approach the question of small hospitals with considerable sympathy."—[Official Report, 24 May 1979; Vol. 967, c. 1226.]
Later that same year the Minister for Health told the Conservative conference:
I can assure you that no closure of a small unit or hospital will be agreed by us unless we are certain that it is unavoidable and in the best interests of the patients … We must not have false economies. We must not close down small hospitals which are deficient yet vital to the local community.
True to his word, during his three years of office, the then Minister for Health was able to save several small hospitals. It was only his personal intervention last summer, following a visit, that averted the closure of the Victoria and allowed this year's reprieve. I hope that his successor, my hon. and learned Friend the Minister for


Health, will take the same view, will have equal success and will be able to find a way to save Victoria hospital. The hopes of many thousands of people now rest upon his decision.
The value of the surgical unit cannot be disputed. About 2,000 operations are carried out there each year. They are, in the slightly chilling jargon of the medical profession, elective cold surgery—minor operations such as ruptures which are for conditions not of the greatest gravity but painful, disabling and inconvenient.
In all my 13 years' association with Romford, eight years as its Member of Parliament and before that for five years as its parliamentary candidate, I have never heard a single complaint about the hospital, only warm appreciation. Patients come by appointment, make a rapid recovery in the restful surroundings of the cottage hospital and resume their active life with the minimum of delay.
The advantages of a small hospital are evident everywhere. Its human scale is comfortingly intimate, the staff are attentive and intensely loyal, there is little noise at night and sleep is not disturbed by emergency admissions, and the homely atmosphere and attractive garden encourage recuperation.
Why should anyone in his right mind want to close this unit? The answer is that the district health authority and its predecessors have the embarrassment of a spare ward and operating theatre in the district general hospital on which they have unwisely spent an unnecessary amount of public money in recent years and which they desperately need to justify. To that end the district health authority is prepared to discard the proven public asset, Victoria hospital, against almost total opposition from the community that it is there to serve.
The debate is too short to go into all the details of the complex and unhappy history of this matter. As my hon. and learned Friend has kindly agreed to receive a small deputation led by me, with representatives of the nursing and medical staff as well as the general public, before he makes a final decision, it would be more appropriate for me to present our detailed case then.
However, I should like to make one general point which the Government should study as a matter of wider interest; that is whether present procedures ensure democracy in the National Health Service. The division of opinion on this issue can be summarised as: "for" the proposal to close the Victoria hospital as we have known it for almost 100 years—the regional health authority, the district health authority and the community health council, all appointed, unelected bodies that are not directly accountable to the public; "against" the proposal—the Member of Parliament, the Member of the European Parliament, the member of the Greater London Council, and the borough council, all of whom are elected representatives of the public and accountable to them, and 45,000 members of the public themselves who put their signatures to a petition of protest which I presented to my hon. Friend last summer.
Whose view should prevail? Whose Health Service is it, anyway? The defection of the community health council has been a particular disillusionment. From my experience, I cannot now confidently support its continuance. Originally, the Havering and Barking community health councils were foremost in opposition to the proposal. They organised a crowded town meeting

over which they invited me to preside and from which many were turned away, and they set up an action committee to fight the closure.
Later, the CHCs were quietly taken on one side by the area health authority and threatened with the prospect of never getting the child assessment unit and the psychogeriatric unit which they badly wanted, and which are part of the proposals for the re-use of the Victoria, unless they agreed to the closure of the surgical unit. Overnight they did a complete turnabout, disowned their own action committee and proceeded to rewrite their part in the history of the matter in a way equalled only by Soviet historians covering up the enormities of the post-revolutionary Stalinist regime. To explain their volte-face they suggested that the area health authority had changed its policy and that the original proposal was not only to close the Victoria as a surgical unit but to dispose of the buildings as well. That was never the case.
The first proposals, like the second proposals and now the third proposals, were all for re-use, including, to start with, the proposal that part of the hospital should be used for offices for health administrators, an idea so outrageous that the area health authority quickly recoiled from the public anger that it aroused and dropped it in favour of more beneficial uses.
If there is any postgraduate student who wishes to research the struggle between bureaucracy and the public, he could not choose a more revealing case study than this one. He would be able to examine how a hospital which, at the maximum, had 101 beds has gradually had the life snuffed out of it until it now has only 32 beds, how the most recent reduction of 16 beds was the closure of the children's ward in February 1978 at short notice, without consultation and within about 72 hours, how the authority was able to do that because it called it a "temporary" closure, and how it is still closed today, four and a half years later.
That student would be able to study how the same authorities who profess concern for underused assets could leave the resultant empty wards to gather dust for years on end and let the grass grow knee-high in substantial grounds, undeveloped and at prime residential value. He could even calculate how many hundreds of thousands of pounds such stewardship has cost the taxpaying public in wasted opportunity and avoidable expenditure elsewhere.
It would be better to look to the future. There could be positive, alternative plans to include the continuation of the surgical unit at Victoria hospital and there should be. It is clear that if the service is transferred to another ward at Oldchurch hospital, which has seven fewer beds, presumably mixed, and which is vulnerable to the prior claims of accidents and emergencies, hospital waiting lists will lengthen and many members of the public will be inconvenienced and kept off work longer than necessary. Alternative uses could certainly be found for the space at Oldchurch. Already, where previously it was said that two upgraded wards would remain empty, there is now only one. The site is overcrowded and other specialties are in need of expanded facilities. The claimed saving of £40,000 revenue a year is not a small sum, but it is a minor matter compared with the millions spent in the district and in these terms, sufficiently marginal to be capable of presentation to suit the case, without challenge from amateur outsiders.
The Minister will appreciate that the general public has no specialist resources with which to combat such plans,


with which it can test the validity of the financial calculations or explore the possibility of alternative strategies. I hope that the Minister's expert staff can come up with a more acceptable alternative. Neither of the proposed new uses for the Victoria hospital is ideal. The district health authority acknowledges that the psycho-geriatric unit would be better located in the London borough of Barking and Dagenham next door, and to place the child assessment unit at the Victoria hospital rather than in association with a district general hospital is contrary to the recommendation of the Court report and Government policy. There would certainly be space for one of those services if surgery were continued, and the possibility of extra development in the future, given the will.
As long as the district health authority remains dogged in its defence of the original mistaken decision, other constructive alternatives will be stifled, if not stillborn. I hope that my right hon. and hon. Friends at the Department of Health and Social Security will be able to liberate the debate and find a solution that puts patients and public first.

The Under-Secretary of State for Health and Social Security (Mr. Tony Newton): I acknowledge the point made by my hon. Friend the Member for Romford (Mr. Neubert) that, to a degree, we have a common interest in at least some of the hospital services in his area, as many of my constituents use some of the facilities at Oldchurch hospital and its neuro-surgery unit. I vouch from experience for the vigour with which my hon. Friend fights for his constituents' interests. They are lucky to have him as an advocate on this and many other issues.
It is important that the proposed change of use of Victoria hospital should be understood in the context of health provision as a whole in the Barking, Havering and Brentwood district, and the district health authority's strategy. It is also important—I acknowledge this readily in the light of what my hon. Friend said—that full account should be taken of local views when the future of a valued local hospital is being considered. I emphasise that this is not a total closure proposal, but technically a change of use. I hope that we can agree that there is a useful role for the hospital in the future as a small hospital. The argument is about what the role should be.
The new Barking, Havering and Brentwood health authority is served by two district general hospitals, the Oldchurch and Rush Green hospital complex, which serves Dagenham and the western half of Havering, and Harold Wood hospital, which serves Brentwood and the eastern half of Havering. In recent years extensive development has been carried out at Oldchurch hospital in the form of six new operating theatres, an intensive therapy unit, and the upgrading of two wards. At the moment the sixth operating theatre and ward accommodation are unused due to shortage of revenue. Within this overall pattern of acute services in the district, the Victoria hospital in Romford has been playing a small but valued part. Victoria hospital is a 32-bed acute hospital situated on a prime site in a residential area about a mile and a half from Oldchurch hospital. In the main patients have been "intermediate" or "minor"—to use technical terms—surgical cases.
During 1979 and 1980 the former Barking and Havering area health authority consulted on the transfer of

acute services from Victoria hospital to Oldchurch hospital, and on the future of Victoria hospital. The authority's initial plan was to transfer the case load of Victoria hospital to the spare theatre and ward at Oldchurch, releasing revenue to Oldchurch by the closure of Victoria hospital. That proposal was unacceptable to the former Barking and Havering community health councils, and it aroused widespread local concern, which was raised effectively in a previous Adjournment debate by my hon. Friend on 23 May 1979.
In February 1981 a second proposal was advanced which linked the rationalisation of acute services in the district to the development of the priority services. It was proposed that the 32 surgical beds and the hearing aid and orthodontic service at Victoria should still be transferred to Oldchurch. However, out-patient services at Victoria would be retained and transferred from Harefield house, which is situated in the grounds of the hospital, to the main hospital building itself. That would enable the sale of a potentially desirable and valuable part of the site, thus liberating funds for use in making improvements to Victoria hospital. These improvements would be made—my hon. Friend acknowledged this fairly—to provide a much needed 30-place psychogeriatric day hospital and a paediatric assessment unit.
The proposal must be assessed in the context of the district's own financial and strategic position, and the strategic position of North East Thames regional health authority as a whole. Barking, Havering and Brentwood health authority is adequately provided for in the terms of the Resource Allocation Working Party, and cannot expect any growth money in the foreseeable future.
There is therefore a need to make economies in the acute services so that the regional strategy of redistributing resources to make greater provision within the district for the priority services can be pursued. The district is deficient in some aspects of priority service provision. For example, it has no service for elderly people with psychiatric disorders apart from a service provided from a large mental illness hospital. We fully support that basic strategy.
There are also some important local considerations involved in the decision. The district health authority wishes to concentrate all its acute services in the western half of the district on the Oldchurch and Rush Green district general hospital complex where there are appropriate back-up facilities. It is also keen to utilise fully the new capital developments at Oldchurch and Rush Green hospitals. If acute work were to continue indefinitely at Victoria hospital, substantial upgrading would be required there, but capital is urgently required for other purposes, such as those that I have mentioned. In the event, the latest proposals have gained the support of many local bodies and interested parties.
One significant objection to the proposals, which ray hon. Friend mentioned, is the fear amongst some of those involved that there would be longer waiting lists for "cold" surgery if the proposals were to be implemented. However, the district health authority is satisfied that Oldchurch hospital will be able to cope with the increased load. It points out that if the proposals were implemented, surgery would be carried out in upgraded, modernised, and safer buildings, which would lead to greater efficiency. It is also looking at the possibility of reserving


certain beds at Oldchurch for "cold" surgery and the possibility of reallocating one or more extra beds to oral surgery.
I said at the beginning that it was important to consider the strategic context of the current proposals, and I hope that I have shed some light on this aspect of the proposed change of use. My hon. Friend has also, rightly, emphasised the importance of taking account of local opinion in these matters. I believe that that is precisely what has happened throughout the extensive discussions which have taken place on the future of Victoria hospital over the last three or four years, in which my hon. Friend has played a leading and important part.
Local objections from some interested parties, including Barking and Havering community health councils and my hon. Friend, led to the rejection of the former area health authority's initial proposal to close the hospital completely.

Mr. Neubert: It is important that I challenge that description of the original proposal. It was not proposed to close the hospital completely. The original proposals were for a change of use, as are the present proposals.

Mr. Newton: I note what my hon. Friend says, but I understand that the initial proposal at least came closer to closure than do the current proposals.
In February 1981 the proposal that the hospital should have a new role was agreed by Barking and Havering community health councils, which opposed the original proposals. At that stage, the main opposition came from the Victoria hospital action group, with which my hon. Friend is associated.
The procedures for the closure and change of use of health premises are set out in guidance issued by the DHSS in 1975. The aim of these procedures is to enable resources to be redeployed with the maximum speed and simplicity consistent with adequate local and, where relevant, national consultations. The guidance states that if the community health councils involved agree to a proposal and the Secretary of State has not asked to be consulted further before approval, the health authority—in this case, the former area health authority—may proceed, notifying the regional health authority and the Department of the decision.
In this particular case, because of the local disquiet, the former Minister for Health, my hon. Friend the Member for Reading, South (Dr. Vaughan), took a particular interest in the consultations. On hearing of the area health authority's decision to proceed with the proposed change of use, he visited the hospital to inform himself of the strength of local opinion. He then decided to take the unusual step of intervening in the matter in spite of the community health council's agreement to the proposal. The area health authority was therefore requested to submit its proposal to the regional health authority, which would refer it to the Secretary of State if it supported the area health authority.
Following careful consideration, the regional health authority asked the former area health authority to reexamine its proposals and present the results of its reexamination to the Barking, Havering and Brentwood health authority so that the new authority could give the matter urgent consideration sand report its decision by July 1982.
In the event—this is what has given rise to my hon. Friend's concern and to today's debate—the new authority endorsed its predecessor's view. As my hon. Friend also said in no uncertain terms towards the end of his speech in criticising precisely that decision, the new community health council has also accepted the proposals in their entirety. The proposal has now received the agreement of the regional health authority and has been referred to Ministers.
I am afraid that there is very little that I can add to what my hon. Friend has said today, except to confirm what he said at the end of his speech. My hon. and learned Friend the Minister for Health has agreed to meet my hon. Friend and a small deputation to discuss the whole matter in more detail before he makes the decision that he is now called upon to make. As I am sure my hon. Friend is aware from his knowledge of the Minister—and I happily confirm this—my hon. and learned Friend will give my hon. Friend's representations and what is said at that meeting very careful consideration before reaching his final conclusion.
I shall, of course, also draw my hon. and learned Friend's attention to what has been said today, both about the specific issue which is to be the subject of the meeting and the wider points that my hon. Friend has made about the whole process surrounding proposals for closures and changes of use of hospital facilities of this kind.

Orders of the Day — Merchant Navy

Mr. R. C. Mitchell: During the last war, thousands of members of the Merchant Navy were killed and wounded in the service of their country. Throughout those six long years, the Merchant Navy provided the lifeline to this country, especially in the period 1940–41 when Britain stood alone—supplying this country with food and materials and subject to constant attacks from U-boats and enemy surface ships.
After the United States came into the war in December 1941, the Merchant Navy played a vital role in bringing troops from the United States to Europe to take part in the conflict. My father, who was a member of the Merchant Navy for 50 years, sailed on the "Queen Mary" during the war and I understand that on one famous occasion she carried 18,000 American troops from New York to Southampton.
The Merchant Navy will also be remembered for its part in the Murmansk convoys, supplying a lifeline to the Soviet Union, which was our ally during the war.
At the end of the war the Merchant Navy was given its due credit. In the victory celebrations in London, the Merchant Navy marched side by side with the three Services. That was only right because it had played a vital part in the survival of this country. Sadly, after the war, the Merchant Navy tended to return to being just another industry. Like other industries, it gradually met the full weight of foreign competition. Since 1975, the United Kingdom merchant fleet has declined from 50 million tonnes to 29 million tonnes, a loss of 40 per cent. Among the ships that have gone are many cargo liners, which, according to the General Council of British Shipping, would have been most valuable to this country in time of war. It is, however, difficult to find in any defence White Paper in those years any reference to the Merchant Navy. I cannot find any mention of the Merchant Navy in the latest "Statement on the Defence Estimates".
It was not until the Falklands operation that the Merchant Navy again hit the headlines. Everyone recognises that the operation could not have been mounted without the requisitioning of ships such as the QE2, the "Canberra", the "Uganda", the "Atlantic Conveyor" and many others. I recall two years ago taking part in a march through the streets of Southampton. I do not often take part in marches and that sort of protest. I was, however, proud to take part in that march preceded by the Union Jack and the Red Ensign and slogans that read "Keep the QE2 British". At that time, there were strong rumours that the QE2 would either be sold to a foreign shipping line or transferred to a flag of convenience.
How could troops and supplies have been carried to the Falklands without the ships I have mentioned? Had they been sold to foreign shipping lines, they could not have been requisitioned. Even if they had been placed under flags of convenience and remained under British ownership, it would have been much more difficult to requisition them, as the Government recognised in a written answer that I received several months ago.
It is a matter not only of the ships but of the men. It is an irony that there were tremendous celebrations in Southampton when the "Canberra" returned in triumph. It was not generally realised that many of the crew were volunteers for the Falklands who, on their return, were to

be replaced by cheaper foreign labour. I am not blaming P & O for that. It was well known beforehand. Many of those who volunteered to go to the Falklands knew that it was a one-off job. This shows clearly that in times of conflict we need British seamen as well as British ships. We called for volunteers to go on "Canberra" to the Falklands. Since 1975, the number of British officers in the Merchant Navy has fallen from 41,000 to 28,000 and the number of United Kingdom ratings from 38,000 to 26,000. All the signs are that the decline will continue until steps are taken to halt it.
The Falkland Islands conflict has clearly shown that the defence of this country requires adequate ships flying under a British flag and staffed by British officers and crew. My contention is that the Merchant Navy should be regarded as an essential part of Britain's defence strategy. If necessary, money should be made available from the defence budget to ensure that we keep in this country a strong Merchant Navy. In a sense, the principle has been conceded by the Government already in the replacement of the "Atlantic Conveyor". Originally, it was my intention to say a lot more about the "Atlantic Conveyor", but all I say now is that I am pleased that the Government have yielded to pressure from all quarters—unions, employers and the general public—and come to an arrangement with Lord Matthews to have the replacement built in a British shipyard.
I do not expect the Under-Secretary of State to give me the full details, but I ask him two specific questions. Will the money involved come mainly from the defence budget? Is the Ministry insisting that the replacement "Atlantic Conveyor" has modifications to meet possible future defence requirements?
As I understand it, talks have been going on for some time between the General Council of British Shipping and the Ministry of Defence about possible defence involvement in the design of new merchant ships and the modification of existing ones. I quote from a brief which the council was good enough to send me. It says:
The kind of defence features we have in mind are:

(i) The installation on selected merchant ships of anti-missile `kit', the kind of 'kit' which could throw up `chaff' to divert missiles (if the `Atlantic Conveyor' had been so equipped, she might never have been hit) or containerised anti-missiles.
(ii) More tankers to be equipped with RAS (Refuelling at Sea). The importance of this was shown in the Falklands conflict when RAS equipped tankers were needed immediately and proved essential to the Task Force.
(iii) Containerships can be developed for a helicopter and possibly a Sea Harrier role—the Arapaho project. This has been talked about for years but nothing has been decided. The necessary merchant ship tests have not been carried out.
(iv) The possibility of inclusion in some new ships, e.g oceangoing ro-ros, of strengthened decks (for Harriers and helicopters) and the installation of lifts so that aircraft can be parked below the main deck."

Those are just some examples of how there could be cooperation between the Ministry of Defence and the shipping industry to ensure that in any future conflict similar to the Falklands which might happen elsewhere we had an equipped Merchant Navy ready to play its full part.
I hope that in the review of the Falklands operation the Ministry of Defence will take full account of the role played by the Merchant Navy. I quote from Admiral Sir John Fieldhouse, the Commander-in-Chief of the Fleet, who said:


I cannot say too often or too clearly how important has been the Merchant Navy's contributions to our efforts. Without the ships taken up from trade, the operation could not have been undertaken, and I hope this message is clearly understood by the British nation.
I hope that this message is clearly understood by the Government.
The conclusion must be that in addition to the three Services—the Army, the Royal Navy and the Royal Air Force—there is a fourth arm of defence, the Merchant Navy. Appropriate steps should be taken to ensure that the British Merchant Navy—I stress the word "British"—does not decline further. In that, I hope that the Ministry of Defence will play its part.

The Under-Secretary of State for the Armed Forces (Mr. Jerry Wiggin): The hon. Member for Southampton, Itchen (Mr. Mitchell) has rightly drawn attention to the relationship between all the Armed Forces, but particularly the Royal Navy, and the Merchant Navy. This relationship, which is one of interdependence, is of great national importance and of long standing. Therefore, I welcome the opportunity to say how my Department sees the role of the Merchant Navy, which was aptly described a moment ago by the hon. Gentleman as the fourth arm of defence.
The hon. Gentleman will realise that part of what he said—for example, his remarks about the size of the British merchant fleet—is a matter for the Department of Trade rather than for my Department. But I shall draw his remarks to the attention of my right hon. and noble Friend the Secretary of State for Trade.
Much of what the hon. Gentleman said touched on my own interests, and it is on these and on the part that the Merchant Navy plays in defence thinking that I propose to focus my remarks.
This debate takes place against the backcloth of the Falklands operation in which the Merchant Navy played such an important and impressive part. My hon. Friend the Minister of State for the Armed Forces, opening last week's debate on the Royal Navy, said that he wished to pay a well deserved tribute to the contribution of the Merchant Navy, and I make no apology for reverting to that theme both because I believe that the House will wish to know a little more about the scale and nature of the contribution and because a great deal has been learnt from the events of the past few months. These lessons still have to be fully analysed, in this matter as in others. Inevitably that means that they will be taken into account by the Naval planning staffs in due course.
As my right hon. Friend the Secretary of State said earlier in the week, the part played by the Merchant Navy will feature in his White Paper on the lessons of the Falklands operation which, as the House knows, is to be published later in the year.
The taking up of ships from trade is no latter-day phenomenon. Half of Nelson's fleet at the battle of the Nile were merchant ships. More recently, a large number of merchant ships were engaged in support of our defence effort during the Second World War.
There was reference in the Navy debate to the part played by the "Queens" as troop ships during the Second World War, and I was interested to hear of the contribution made by the hon. Gentleman's father in that operation.
Indeed, I remember my hon. Friend the Member for Wells (Mr. Boscawen) saying with what warmth he learnt, as a member of the invasion force, of the landing of a large number of American troops from the "Queen Elizabeth" in Cherbourg, and how confident he then felt that the invasion would proceed with success from that point. There are many examples, and that is just one of them.
Our plans for a time of national emergency envisage a number of ships being taken up to assist the Armed Forces—tankers, roll-on roll-off vessels to ferry men and equipment to the Continent, trawlers to operate as mine counter measures vessels, and so on. Therefore, the framework for chartering and requisitioning ships already existed. The operational and logistical staffs did not have to start from scratch, but the characteristics of the ships taken up from the trade, or STUFT, as they quickly became known—my Department insists on the use of initials in all cases—were in many cases different from those likely to be needed in an operation within the NATO area, not least because of the vast distance that had to be covered and the very real logistical problems that had to be solved.
So far, 58 ships have been taken up. The House will realise that the process has not yet stopped. Many ships have now returned to the United Kingdom and have been returned to their owners, but others are still needed to support our ships contributing to the naval force that will need to be maintained in the South Atlantic for the foreseeable future. The ships taken up cover a wide spectrum which amply illustrates the logistical support necessary to sustain an enterprise of this kind at the other end of the globe.
Passenger liners such as the QE2 and "Canberra", or ferries such as the "Norland", were used to carry the troops who fought so bravely to recover the Falklands. The passenger liner "Uganda" was taken up at Naples, in the middle of an educational cruise, to be repainted and hastily converted into a hospital ship. Five trawlers were taken up to be used to sweep the waters off the Falklands which had been feared to have been mined. Ships such as the "Atlantic Conveyor"—so tragically sunk in the attacks on the task force—and her sister ship the "Atlantic Causeway" were used to ferry helicopters and Harrier aircraft.
A number of ships were used to carry ammunition, heavy equipment and general stores. Those and a large number of tankers were acquired to supplement the vessels of the Royal Navy's own support fleet, the Royal Fleet Auxiliary. Other ships were taken up as floating workshops, as despatch vessels, and to lay moorings. Last, but by no means least, there were the tugs "Salvageman", "Yorkshireman" and "Irishman", which similarly had an important part to play. It was by any standards a formidable armada. If ranged end to end—a typically useless statistic—the vessels would have stretched from Nelson's Column to the Royal Naval College at Greenwich.
During the Falklands operations, requisitioned and chartered ships carried over 8,000 personnel, 30,000 tons of freight, over 300 vehicles, 18 Harrier aircraft and about 80 helicopters to the Falkland Islands. Overall, about 12 million meals and 1 million operational ration packs were carried south, and on 14 June 420,000 tons of fuel were in the supply chain between the United Kingdom and the


South Atlantic. Latest figures indicate that more than 670,000 tons of fuel have been transported to support the operation.
It is no exaggeration to say that the actual taking up of ships and the preparation for service in the South Atlantic went like the proverbial clockwork. That was principally due to the longstanding co-ordination of defence planning for merchant shipping between my Department and the Department of Trade. That brings me to the points raised by the hon. Gentleman. This enabled both Departments to tackle the operation with mutually-understood roles and led to the Department of Trade's rapid identification and acquisition of suitable ships followed by their handover to the Ministry of Defence for conversion to their designated role.
Nineteen ships were fitted with flight decks or helicopter operating platforms. Many were equipped with gear to enable them to refuel at sea and others were adapted for self-defence, including the installation of special communications systems.

Mr. R. C. Mitchell: The Minister said that the size of the merchant fleet was primarily a matter for the Secretary of State for Trade. Surely that is only partly so, because he has listed many of the ships that were requisitioned. However, had those vessels been sold or transferred to flags of convenience, they could not have been requisitioned. As a result, the Ministry of Defence has a vital role in assessing the size of the British merchant fleet.

Mr. Wiggin: The hon. Gentleman's point has substantial implications for my Department, because in the event of any conflict we rely enormously on civilian resources. We are debating the Merchant Navy, but the hon. Gentleman can imagine what we would do with civilian plant and personnel in the event of war. The role of my Department is constantly to be aware of what is available.
We keep an eye, but only an eye, on such matters as the size of the trawler fleet, bearing in mind that there is a wartime role for such ships. Given the way in which Whitehall is organised, it is right and proper that the Department of Trade should look after all merchant shipping. Our interest, involvement and responsibility is simply to be aware of what is available. I understand why the hon. Gentleman made that point, and I have considerable sympathy with it, especially in view of some of the activities of requisitioning the ships that took place in the Falklands operation.
The average fitting-out time was a mere three days. That is a remarkable testimony to the enthusiasm and professionalism—not to mention the sheer ingenuity—of the naval and commercial yards involved. The labour force willingly worked long hours, day and night, to get the work done as quickly as possible.
The part played by ships taken up from trade in the actual operation needs no further elaboration, but I should like to draw attention to one important aspect that was an essential element in preparing ships for service in the South Atlantic. I refer to the briefing and training that masters and crew underwent at the outset. Many masters were already members of the Royal Naval Reserve or had attended the courses regularly run by the Royal Navy on Merchant Navy defence, with especial reference to passive defence measures for the protection of a ship and her crew.
Senior naval officers, officers of the Royal Fleet Auxiliary and Royal Naval supply and transport service

personnel were embarked on the larger ships. Tremendous enthusiasm to learn was shown by those masters and crews who were new to this role. The fact that ships sailed from the United Kingdom, rendezvoused with a ship of the Royal Fleet Auxiliary and carried out refuelling at sea for the first time, sailing on southwards, learning to operate fully darkened and without navigation lights once clear of the main shipping routes, occasionally putting on a zigzag and operating with minimum use of radar—and all of this within 10 days—reflects immense credit on the professionalism of the Merchant Navy and the tremendous team effort by the Merchant Navy, the Royal Navy and the Royal Fleet Auxiliary.
The House can indeed be proud of the Merchant Navy. Nor can we afford to ignore the extent to which we, as island people, are dependent on sea-borne trade for our livelihood. It is all too easy to forget that the food and raw materials on which we must depend—and will continue to do so—are brought in by sea as they have been over the centuries. Ninety-six per cent. of our imports and exports are conveyed by ships, half of these in British ships. Our Merchant Navy is the fifth largest in the world, and the second largest in NATO.
The hon. Gentleman expressed his worry about the decline in merchant tonnage. In one way or another, the Merchant Navy was able to meet the varied and difficult requirements that arose during the Falkland Islands operation. The hon. Gentleman mentioned the "Atlantic Conveyor". The details of the replacement are being dealt with now and I cannot add very much to what he will have read in the newspapers. My Department has agreed to contribute £4 million to the deal. He will be able to satisfy himself in due course that the defence interest will justify such an expenditure. The availability of a ship of this nature, guaranteed not only for emergencies but for exercises on a regular basis, will be a valuable defence asset to our reserves. One of the many lessons that will have been learned from this exercise was the way in which we were able to use the "Atlantic Conveyor". I have spoken recently with United States naval personnel who were extremely interested in that part of what happened. NATO has plans for such exercises—perhaps they will be accelerated—on a wider basis.
I shall not delve into the role of the unions in the recent crisis. The merchant crews involved all volunteered. It would be not unfair to say that the unions insisted that all the crews should be British, and on extra wages to which the Government agreed immediately. The numbers involved were somewhat larger than some of the foreign crews who were represented before. There is no secrecy or politics in the fact that many British shipowners are finding it more profitable and economic to hire foreign crews. The hon. Gentleman, in representing Southampton, Itchen, knows the economics of the matter, which are not always to the benefit of the British seamen. That is a matter of opinion and I do not wish to get into a political argument with him about it.
One of the Royal Navy's responsibilities is to safeguard British flag carriers in peace time. Although the hon. Gentleman did not mention it in his speech, that feature of the Navy's responsibilities is related to the subject that he raised. When we saw a threat to our merchant shipping in the Straits of Hormuz, after the war broke out between Iran and Iraq, we immediately established a Royal Naval patrol in the area. Currently, two warships—one of which, incidentally, thanks to the generosity of the New Zealand


Government, is Her Majesty's New Zealand Ship "Canterbury"—are at notice to come to the assistance, if needed, of merchant shipping crossing those troubled waters.
By the same token, we plan to resume the practice of out-of-area deployments by a task group. This will enable the Royal Navy to visit ports in friendly countries and, where possible, to exercise with other navies, thereby consolidating our ties with nations outside the NATO area. But these deployments can also be seen as an indication of the Royal Navy's preparedness to safeguard the interests of British merchant ships operating in other parts of the world.
A great deal of work has been carried out on planning for the protection of merchant shipping in wartime. These plans, although largely prepared in conjunction with our NATO allies, extend worldwide and are regularly exercised.
The Supreme Allied Commander Atlantic is charged specifically with maintaining control of vital sea areas of the Allied Command Atlantic and with protecting the seaborne traffic of the Alliance through these areas. A major objective is the safe and timely arrival of reinforcement and resupply shipping from North America as well as of economic shipping bringing vital supplies of food and raw materials. It is the Soviet submarine that will be the most significant threat to this shipping, although the air and surface threat cannot be discounted.
It is for this reason that our own maritime forces are configured very largely for anti-submarine operations. It is the role of the naval control of shipping organisation to co-ordinate shipping movements so that the necessary protection can be afforded. Last year's major maritime exercises Ocean Safari and Ocean Venture were designed essentially to test the ability to keep open the transatlantic sea link, and a number of useful lessons were learnt as a result. The means by which protection would be afforded to merchant shipping in time of crisis were explained in detail to members of the General Council of British Shipping at a meeting with my hon. Friend the Minister of State for the Armed Forces earlier in the year, and I believe that this was a most valuable occasion.
It gave me a great deal of pleasure to host a dinner given by the Admiralty Board only the night before last to the general council and to representatives of firms involved with the exercise that has so recently been successfully concluded. I was able to say to the shipowners themselves a big "Thank you" on behalf of the country and the

Government for the contribution which the Merchant Navy undertook and is still carrying out in supporting the task force.
I have already referred to the close relationship between my Department and the Department of Trade,. I should mention briefly the number of committees that sit to coordinate this relationship. The principal forum is the shipping defence advisory committee. The joint merchant shipping defence committee, which is chaired by the Department of Trade but on which my Department is represented, contains representatives of the industry. It is designed to improve liaison between Government and industry on planning for the direction and role of merchant shipping in time of tension or war. The Royal Navy-Merchant Navy committee, which reports to the shipping defence advisory committee, meets on a regular basis. There are other committees in the wider NATO context—for example, the planning board for ocean shipping.
I have gone into some detail in order to illustrate the regular discussions that take place between the Government in general, and my Department in particular, and the shipping industry on matters of mutual concern. A formal presentation was given to members of the General Council of British Shipping at the fleet headquarters at Northwood last week on the part played by merchant shipping in the recent operations, and I understand that this was well received and provided useful food for thought.
There are many lessons to be learnt from our experience in the South Atlantic. We shall need to share these lessons once they have been fully digested with the industry. It is important to bear in mind that the circumstances of the Falklands operations—the long distances, the absence of nearby port facilities and the appalling climatic conditions—were very different from those which could be expected to apply in the event of a European war.
The Falklands operation has highlighted the interdependence between the Royal and Merchant Navies. This debate has provided a useful occasion briefly to demonstrate the part that the Merchant Navy plays in defence thinking and to bring out the close and continuing liaison that exists between the Ministry of Defence and the shipping industry.
I wish, in conclusion, again to express my Department's appreciation of the co-operation of the industry during the Falklands crisis and of the skill, determination and great courage shown by the masters and crews of the vessels who sailed in support of the task force. It was a magnificent achievement. We are truly grateful.

Orders of the Day — Hearing-impaired Persons (Telephones)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Berry.]

Mr. John Golding: This afternoon I appeal to the Government on behalf of literally millions of people who are hard of hearing and so phone deaf, and the increasing number who will become so in the future. As part of their liberalisation programme, which I deplore, the Government are in the process of setting mandatory standards for telecommunications apparatus to prevent hazards for British Telecom operators and interference to the system. To those new standards should be added a mandatory requirement that any telephone fitted to the BT system should be capable of being used with hearing aids.
I do not ask that all telephones be adapted immediately, nor do I expect that a mandatory standard can come into force immediately. I ask, however, that a mandatory standard for the future be adopted now. Exhortation is not sufficient. A voluntary standard will not do the trick. It could not survive in the present competitive jungle.
This cause has been presented diligently and persistently by Mr. John Hart, a former Post Office Engineering Union branch officer. He has had the backing of the establishment committee and the national executive council of the POEU and Peter Shaw and Ron Collett, officers of the union. This cause is supported by the Post Office Users National Council, Royal National Institute for the Deaf and the British Association for the Hard of Hearing. Much help has been given by my right hon. Friends the Members for Manchester, Wythenshawe (Mr. Morris) and for Stoke-on-Trent, South (Mr. Ashley).
As a union, we in the POEU have always been concerned to provide a service to individuals. We do not wish to see groups of physically handicapped people suffer disadvantage in the use of telephones because of commercial attitudes or advancing technology. Isolation is already a curse on the hard of hearing and we should not intensify it.
The telephone was invented as a by-product of Alexander Graham Bell's attempt to help the hard of hearing, including his wife. In time, it was discovered that telephones could be used by eight out of 10 hearing aid users at a flick of a T switch. That ceased to be true in Britain with the introduction of a type 700 telephone, which was phased in from 1958. Now, due to the advance of telephone technology, the T switch does not work with many telephones. The hard of hearing face telephones that are always dead. Why is that so?
To put it crudely, the sounds of the caller created magnetism that leaked from the ear piece and could be converted back into the original sounds by a hearing aid pick-up. Through time, the amount of stray magnetism has been reduced, until now there is too little for it to be used in the interests of the hard of hearing. We must rectify that. We must make it possible for hearing aids to be used effectively again with telephones.
For me, any method will do, but what is now practical and urgently required is the general use of the inductive coupler. This is a cheap and easy way of restoring the magnetism, being simply a few turns of thin wire round a receiver inset, contained in a plastic moulding. It is devastatingly simple, cheap costing perhaps 20p to 30p

to produce and less than £1 to buy—and efficient. Indeed, there is no argument about its efficiency, although there is some transmission loss which, however, is negligible. Thanks to the Department of Transport, all motorway telephones are now to be fitted and, despite some inexcusable dragging of feet, all BT kiosks will be fitted by the end of the year.
The problem is that of the 27 million telephones, only a quarter of a million are fitted with inductive couplers. The POEU has done everything possible to push BT. As a contribution to the International Year of Disabled People, we approached BT with a proposal that members would demonstrate inductive couplers in homes and work places, if necessary in their own time, if BT would waive the £5 installation charge. However, we want the problem to be solved in a more workmanlike, thorough-going manner.
As I have said, there are still only a quarter of a million telephones out of 27 million fitted with inductive couplers. In all new telephones, and in replacements over 10 to 15 years, it should be compulsory to fit inductive couplers, or any other device which provides a solution for the hard of hearing. Let me emphasise that manufacturers should be required to produce telephones that are usable, not forced if they can find a better method to achieve this, to use inductive couplers.
Why make it compulsory? The answer is because BT is so lukewarm on this issue. Without compulsion BT, not fully comprehending the problem, would not, in this new competitive era, be prepared to accept the cost, however small, or risk being undercut by competitors, despite the fact that perhaps new traffic could be created.
It is essential that any regulations apply to all, whether to BT or British or foreign organisations. BT resisted also because it believes that inductive coupling could impede technological progress in the years to come, although who wants technology for progress at the expense of millions being unable to use the telephone? The answer, of course, is to work now for the distant day when digital telephones will be common.
BT believes that it is sufficient to provide inductive couplers generally in public telephones only, although even here it has been dreadfully negligent in publicising the facility where it already exists. Others, it thinks, should be fitted only on demand, at a price. That is just not good enough. As evidence given to a United States Congressional Committee has clearly shown, that does not meet the needs of the hard of hearing at work, at college, in hotels, restaurants, hospitals, or in the homes of friends and relatives that they may be visiting. It can stop them getting work or accepting transfers. It totally restricts their mobility. It impinges on their dignity.
The hard of hearing want to feel confident that they can use any telephone and they do not wish to be dependent on individual adaptors which they have to remember to carry around. There are sufficient penalties to being handicapped without adding to them. Nor can we be content with passing the buck to the hearing aid manufacturers. There is a solution. Let us adopt it now.
It is for the Government to come to the aid of the hard of hearing and introduce a mandatory requirement that any telephone fitted to the BT network must be capable of being used with hearing aids now and, ideally, at no additional cost to the hard of hearing. The Royal National


Institute for the Deaf feels, like me, that there should be no extra charge for aids for the deaf—certainly that the present rental of 80p a quarter is totally excessive.
Of course, it is not only the inductive coupler that is important; there are also other aids. Amplified handsets are equally as important and should be readily available, particularly in conjunction with the coupler. Additionally, the RNID is concerned to provide a service to those who cannot use a hearing aid—a bureau-based telephone service for the deaf. A successful experimental trial took place in 1980. In essence, this means providing a contact point for the deaf to ring to get assistance to converse on the telephone through a visual means. British Telecom has agreed to give practical support by providing the bureau with equipment and with the maintenance support for one year free of charge. Additionally, the RNID has asked for help, £35,000 plus VAT, from the Department of Industry towards a further experiment. The question for the Minister this afternoon is: can it be given, please?

Mr. Laurie Pavitt: Like the rest of the House, I am grateful to my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) because he has brought to the subject his experience in two areas. First, he has a profound knowledge of the telecommunications industry. Secondly, he is one of the few hon. Members to understand the great difference between complete deafness and a hearing impairment. As a Member of Parliament he has sought to help both categories.
I am probably the only hon. Member to listen all the time in the House with an inductive coupling. It took seven years for the House to accept that, but now every Bench is looped. I achieved that only because the late Sir Winston Churchill, sitting below the Gangway, had his seat wired. That provided a precedent and I was therefore able to persuade the House on the matter.
My hon. Friend the Member for Newcastle-under-Lyme has raised several extremely practical points. I shall be very disappointed if neither the Minister nor the directorate of BT do not take them to heart, particularly when it comes to an additional telephone charge. I still find it a little unpleasant, to say the least, that transistorised telephones are subject to an increased quarterly rental. The House will know that there is one transistorised telephone behind the Chair and one in the Members' Lobby. There are 15 transistorised telephones here. If a person has a transistorised telephone in his home he has to pay not only an extra installation charge but an extra rental fee. Therefore, among the disabled, the deaf are the only people not to have parity with the rest of the community.
My hon. Friend is right about the way in which British Telecom, and previously the Post Office, dragged their feet. For several years, I campaigned for inductive couplings to be placed in airports, at mainline terminal stations and at Crown post offices. I suspect that it is due to the pressure applied by my hon. Friend that that work has recently been carried out. The deaf, and those disabled by a hearing impairment, are the least visible of the disabled. They are lonely. A person with impaired hearing wants to stay within the community. The big problem, particularly with the elderly, is to persuade people to come

out of their shells and to keep in contact. One way of keeping in contact, particularly for grandparents, is by using the telephone.
If British Telecom will accede to the request made by my hon. Friend, it will open up a whole world for the deaf. It is not just a way of dealing with those people who have a hearing impediment, but it will help the aged and lonely. Over a period the National Health Service will save millions of pounds on the care of the elderly and on social services.
I am delighted that most local authorities, through social services, are prepared to allow elderly people living alone to have a telephone at the ratepayers' expense. With the cuts in social service expenditure, it becomes extremely difficult to provide them. It is important that telephones provided for the elderly should have the inductive coupling, because they will often suffer from a hearing impediment. That will enable them to use a telephone that a compassionate society still seeks to provide.

The Under-Secretary of State for Industry (Mr. John Butcher): I congratulate the hon. Member for Newcastle-under-Lyme (Mr. Golding) on having the last word in this parliamentary Session. We were exchanging views at 8 o'clock this morning and I dare say that in the coming Session we shall exchange views on the British Telecommunications Bill. I was not aware, I confess, that the hon. Member for Brent, South (Mr. Pavitt) was instrumental in achieving the wiring of this place so that those with hearing impediments could take part properly in our proceedings.
My hon. Friend the Minister of State, Department of Industry, has charged me with the responsibility of ensuring that Information Technology Year 1982 makes an impact on the disabled and those who are disadvantaged. I am delighted to have been given that task. I wish to see that IT82 shows the human face of information technology, which will allow people to free themselves from certain difficulties by the use of the facilities that information technology makes available. I am grateful to the hon. Member for Newcastle-under-Lyme for raising this important subject. Clearly it is desirable that the deaf should have as much access to the advantages of modern telecommunications as anyone else, so far as it is technically possible. It is important in reducing their isolation. Although the hon. Member for Newcastle-under-Lyme has sounded a warning note about the disadvantages of some recent technical developments, I believe that on balance the information technology revolution will make available more possibilities rather than fewer.
The main point raised is the suggestion that telephones connected to British Telecom's network should be required to incorporate a device, known as an inductive coupler, which will allow incoming calls to be picked up by a suitably equipped hearing aid.

Mr. Golding: My request is that the telephones should be such that they can be used by those with a hearing aid. I said that if manufacturers could find a way other than the inductive coupler that was sufficient, I should want only a mandatory requirement that they be compatible.

Mr. Butcher: Before answering that directly, I might point out that this is directed at the concern of the hon.
Member for Newcastle-under-Lyme that it is not sufficient for public telephones only to include an inductive coupler, but that the deaf want to be able to use the telephone, as he said, at work, in colleges, hotels, restaurants and in the homes of relatives and friends.
That said—I may have to return to him for clarification on his earlier point—I believe that the hon. Member will nevertheless appreciate the prime importance of suitable public telephones and the availability of special instruments for use by the hard of hearing in their own homes or where they usually work.
The hon. Member for Newcastle-under-Lyme will agree that the record of British Telecom, especially during the past year, is a good one. From April 1981 to March this year 67 per cent. of the 77,000 public kiosks were equipped with inductive couplers. Work on the rest—mainly the less used rural kiosks—is progressing. The new standard call office, which will begin to be provided next year, will include inductive couplers, and telephones on motorways and AA and RAC phones have been so equipped.
I am glad that the hon. Member is not asking for all existing telephones to be adapted or that the mandatory requirement that he advocates should take effect at once. It would be unacceptable, as well as impracticable, to compel British Telecom to adapt the many millions of installed telephones that lack the facility. The cost of visits to nearly every subscriber in the land would be prohibitive and it would also not be right to insist immediately that all new telephones should be built with inductive couplers. If such a change is contemplated, manufacturers must have due notice so that they can redesign, where necessary, and modify their production methods.
A far more reasonable idea, and the one that I believe the hon. Gentleman is putting forward, is that inductive couplers should be made mandatory from a future date. I have considerable sympathy with that view, at least in relation to new telephone models. I am less sure that models that were designed and approved for connection under earlier rules that said nothing about inductive couplers should subsequently be compelled to incorporate those devices. The designs may not lend themselves to such a change and a manufacturer who has had the initiative to take early advantage of the opportunities of liberalisation would abruptly find himself at a serious disadvantage to one whose response had been slower.

Mr. Pavitt: Telephones have been made by GEC Associated Automation in my constituency for decades. The hon. Gentleman is rightly outlining some possible difficulties, but I can assure him that there will be no problem on new contracts provided that the specification is as he requires it.

Mr. Butcher: I do not think that we disagree on the point and I thank the hon. Member for that clarification. If a change is to be made it should follow a sufficient period of notice and apply only to models approved after the new requirement became mandatory.
The hon. Member for Newcastle-under-Lyme has eloquently made the case for the measure that he proposes to help the hard of hearing. There is, of course, a cost to what he proposes, which would be passed on to those who buy or rent telephones made to the new standard. Therefore, before the Government can decide finally on the matter that the hon. Gentleman has raised, we must balance the arguments on both sides.
A standard for simple extension telephones is close to completion by the British Standards Institution. An important stage in the preparation of the standard, as with all standards, is the consideration of comments by the public on the standard in draft form.
A number of comments along the line of the hon. Member's suggestion have been made by people and organisations representing the interests of the hard of hearing. These comments have been fully considered by the technical committee responsible for the simple extension telephone standard. The committee has decided that, while the first edition of the standard should contain no mandatory requirement for inductive couplers, the case for including such a requirement in a later edition should be thoroughly examined as soon as possible.
The committee has been made aware that the Government find the case made on behalf of the hard of hearing a strong one, and I am asking the committee to meet representatives of the hard of hearing so that the question of inductive couplers can be fully examined. In the light of that discussion, the Government will decide whether to use their powers under the British Telecommunications Act to make the fitting of inductive couplers a mandatory requirement for the approval of extension telephones for connection to British Telecom's network.
Apart from extension phones, there is the question of prime instruments, and in particular the question of the telephones that British Telecom supplies as prime instruments. Clearly, in the foreseeable future those will make up a substantial proportion of all telephones and, as the hon. Gentleman said, most telephones now supplied require, and are capable of, adaptation for use with a hearing aid.
British Telecom's new standard telephones are of course a matter primarily for BT. It does not believe that it is right for all subscribers to bear the cost of a facility which benefits only a minority. It also appreciates that inductive couplers will not work with the very latest electronic telephones, but it is important to remember that those represent only a relatively small segment of the market, perhaps 10 to 13 per cent. in the next year.
British Telecom is considering new ways of adapting these phones to help the hard of hearing. I take this opportunity to urge them to give considerable priority to this important work and to do so in conjuction with the manufacturers. Clearly, the proportion of such phones will rise in the next few years and there is therefore some urgency.
British Telecom's recent tariff proposals contain the welcome proposal that the 80p quarter charge for an inductive coupler should be abolished from November. The installation fee will be retained, but at its present level of £5.
This brings me to the imaginative initiative that the hon. Gentleman mentioned by the Post Office Engineering Union during the International Year of Disabled People. I understand that from April 1981 to March this year POEU engineers fitted in their own time and free of charge some 20,000 to 30,000 inductive couplers. That is a splendid achievement and I am grateful to the hon. Gentleman for giving me the opportunity of bringing it to the notice of the House.
I began by mentioning ways in which new technology may help the hard of hearing. The hon. Gentleman may be interested to know that the Department has received


several proposals which concern telecommunications for the deaf, and these are receiving particular consideration. However, they vary in size and scope and also in terms of the technology involved. It is necessary to evaluate relative merits of the proposals and to assess their viability, including the proposal that the hon. Gentleman made in his speech. At this time is not appropriate that conclusions should be forced, but I hope to make an announcment of what the Department can do to help in the near future. I might add that one important and comprehensive project—called VISICOM—arose from an initiative by British Telecom.
I undertake to keep with the hon. Members for Brent, South and Newcastle-under-Lyme apprised of developments and, as I said earlier, I congratulate the hon. Member for Newcastle-under-Lyme on having the last word in the current Session of Parliament.
I do not know whether it is a convention, Mr. Deputy Speaker, but may I wish you a most pleasant recess?

Mr. Deputy Speaker (Mr. Ernest Armstrong): I am grateful for the hon. Gentleman's kind wishes and reciprocate them to all Membes of the House.

Question put and agreed to.

Adjourned accordingly at three minutes to Three o' clock till Monday 18 October, pursuant to the Resolution of the House of yesterday.